Pound surges to two-year high against the euro

Sterling has jumped after opinion polls suggested the UK would avoid a hung parliament after next week’s election.

The pound reached a seven month high against the dollar and its highest level against the euro since May 2017.

The move came after polls suggested a 10-point lead for the Conservative party and a parliamentary majority.

However, analysts cautioned against relying too much on one poll and said the pound gained momentum after it went past the $1.30 mark.

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The pound has risen sharply since October, gaining 6% in two months, after the EU granted Britain an extension to its departure from the bloc.

This week sterling climbed further as investors saw the prospect of a hung parliament receding.

Jeremy Stretch at CIBC World Markets said move was caused by traders consolidating all the recent polls and deciding that a Conservative majority was the most likely outcome.

The markets see that as ending the stalemate over Brexit.

However, Michael Brown, senior analyst at Caxton, said: “As we saw in 2017, polls can sharply narrow as we approach polling day.

“If a repeat situation pans out, seeing Labour gain ground and hung parliament territory approach, sterling will likely face stiff headwinds.”

The pound gained as much as 0.7% on Wednesday to touch $1.309 while against the euro, the pound hit a high of €1.181, up 0.68%.

Jane Foley from Rabobank said the pound’s rise was mainly due to “technical reasons” after it went over the “psychological” $1.30 level.

The initial referendum result in 2016 sent the pound sharply lower against other currencies. Since then its value has tended to rise when a Brexit deal, particularly one maintaining closer ties with the EU, was in prospect.