Pound Jumps After Nigel Farage Promises Not to Contest Tory Seats
The pound rallied on increased conviction that the Conservatives will win.
(Bloomberg) -- The pound rallied on increased conviction the Conservatives will win December’s election after Brexit champion Nigel Farage pledged not to fight the ruling party.
The currency rose the most in more than three weeks after Farage, whose Brexit Party could have split votes for the Conservatives, said he wanted to prevent a second Brexit referendum and pledged to concentrate his efforts on preventing Labour Party candidates entering Parliament.
The pound has rebounded to near $1.29 since hitting a near three-year low in September, on the back of Prime Minister Boris Johnson finally managing to secure a Brexit deal. For now markets are fixated on the Dec. 12 election and ignoring most other developments, with volatility rising as the vote comes into view.
“This means the market will price Conservatives getting a majority at this stage,” said Jordan Rochester, a strategist at Nomura International Plc. “This is ‘pound higher by 1% today’ sort of stuff.”
The currency’s focus on politics above all else was once again on show Monday, as the pound barely reacted to U.K. GDP growth, only to move close to 1% on the political developments. Strategists had said a coalition between the Brexit Party and the ruling Conservatives could have been the worst outcome for the pound, as Farage’s lawmakers would likely seek a more distant relationship with the EU and even push for a no-deal Brexit.
Still, though the news is positive for the U.K. currency, it’s not “a game changer,” according to Rochester. Even if the Conservatives were to keep all of their seats from last time, that would still mean a hung Parliament, and the Brexit Party still plans to stand in seats which were won by the opposition Labour party last time.
The pound climbed nearly 1% to $1.2898, the biggest gain since Oct. 17. The currency strengthened by 0.6% to 85.70 pence per euro after touching a six-month peak.
--With assistance from Anooja Debnath.
To contact the reporter on this story: Charlotte Ryan in London at cryan147@bloomberg.net
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, William Shaw, Neil Chatterjee
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