The pound surged against both the US dollar and euro after the Conservatives won a landslide majority at the UK General Election on Thursday (12 December).
Sterling jumped almost 3% to touch 1.3514 against the US dollar, a 19-month high, as markets celebrated the defeat of Jeremy Corbyn's Labour party. Against the euro, sterling hit a high not seen since the referendum vote back in June 2016, at 1.2078 - a rise of around 2.5%.
Richard Buxton, head of UK equities at Merian Global Investors, said the pound's initial reaction was "a little more muted than might have been expected". However, he added, the breaching of 1.20 against the euro "feels significant, and I would not be surprised to see sterling strengthen further from here".
Buxton suggested "it wouldn't seem too outlandish" for sterling to reach 1.40 against the US dollar, either.
While most expect further gains for sterling in the short term, the longer-term picture may continue to be one of volatility. "The UK will still need to negotiate an EU trade deal, and this means that uncertainty will continue to rumble on," said Emma Mogford, portfolio manager of the BNY Mellon UK Income fund.
"Past the end of January, as we get onto negotiating with the EU, sterling will likely be volatile until it is clear what the second phase of Brexit looks like."
The pound has been up and down in the run-up to the vote, as investors' confidence was boosted by poll results predicting a comfortable Conservative win, only to be thwarted the day before the election as new results suggested voters would be far more divided on the day.
On 11 December, a YouGov poll predicted Conservatives would win the election, but with a majority of just 28 seats compared to the originally expected 68-seat win predicted in the prevous survey.
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