Pound rallies to hit post-Brexit high

UK-Currency-Money-Coin-Pounds-GBP-700x450The pound has rallied following the news that the contest for the UK’s prime minister has ended.

Markets rallied following the news that Theresa May would be appointed leader of the Conservatives and prime minister, ending months of uncertainty during the planned leadership election.

The pound reached $1.33, having gained around 3 per cent on its lows. However, the currency still remains more than 10 per cent down on its pre-Brexit level of $1.4789.

Analysts at Scotiabank told the FT that the rally may not last the long term.

“Sterling has perked up somewhat as the ruling Conservatives move swiftly to replace PM Cameron. We do not think the GBP’s problems are over in the longer run, however.

“The new PM still has a lot of work to do, is facing an uncertain outlook and may see the Bank of England ease policy aggressively later this week in response to the Brexit fall out. We expect a 50bps cut in the overnight rate – whereas the street is expecting a 25bps.

“Having taken the steps to warn the markets that easier policy was likely, we doubt Mr Carney will mess around. Easing will pull the GBP rally up short, aggressive easing will send the GBP sliding again.”