The Wall Street Journal: British Pound Surges as Johnson’s Conservatives Win U.K. Election

Article published: Dec 13, 2019

IB Economics syllabus: International economics (exchange rates)

“The pound surged to its highest level since May 2018, hitting $1.3515.” This is due to the fact that the Conservatives, led by Boris Johnson, have won the election in the UK massively and as a result there is now greater certainty, while “U.K. markets have been under a cloud of Brexit uncertainty since the June 2016 referendum” This means that with more certainty, business confidence should also increase, which leads to more demand for the GBP (Great British Pound), driving up the exchange rate (appreciation) as shown in the diagram at the top.

Update: the initial increase in the ER has vanished since then.

Source of image: Tullett Prebon

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