Investment - Articles - Lloyds Bank comment on market reaction to the Election

 “The lifting of the political fog has prompted a sharp reaction in the FX markets. Sterling has spiked higher against both the US dollar and the euro. Sterling rose sharply when the exit poll was published at 10pm last night, with GBP/USD rising to around 1.5450 and extending gains to above 1.55 as the results pointed to a clear Conservative victory. Government bond prices and the FTSE 100 have also opened higher. Within minutes of these markets opening, the FTSE 100 rose around 80 points to above 6,900, whilst 10 year government bond yields dropped over 10 basis points to 1.8% .

  

 "Prior to the election result, pollsters were universally predicting a hung parliament. The results overnight have removed this risk. Nevertheless, over the medium term the markets could focus on the uncertainty surrounding an EU Referendum. The markets may also conclude that the strong performance of the SNP may raise the possibility of another Scottish independence referendum. Both these uncertainties could raise the volatility of the pound over the medium term.”