Earlier today we saw the GBP/USD cross climb to $1.2976, leaving the currency pair at its highest level since the 25th May. The pound rose across the board after a recent opinion poll showed Theresa May and the Conservatives were well on course for victory in today's UK election.
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However, with markets and investors still erring on the side of caution, Sterling has been unable to hold onto the gains and this afternoon had slipped back down to $1.2910, as you can see from the graph below.
GBP/USD graph
Could the pound climb higher?
If Theresa May wins the election with a large majority then it should give the pound a boost. A few weeks ago GBP/USD rose above $1.30 and if the Conservatives are successful, we could easily see the cross break that barrier again once the election result has been confirmed.
At the moment it is difficult to say how much the pound will rise, as a lot will depend on how much a Tory victory has already been priced into the market.
There is certainly room for improvement for the GBP/USD cross, but with the political uncertainty in the U.S. still hampering the dollar, the pound has only dropped around a cent against the greenback in the last three weeks compared to six cents against the euro.
If we do see the GBP/USD cross break $1.30 tomorrow, it will be interesting to see how long it lasts. Once the election is out of the way, focus will quickly turn back to the Brexit negotiations and we could see the pound come back under pressure once again.
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