Sterling has rallied from early April lows to trade at the highest level against the US dollar since the start of 2015 (YTD). In 2014 GBPUSD peaked at just below 1.72, then trending down to the April 2015 low of 1.4565. As the pair traded to the April lows, the media coverage was bullish on the US Dollar with the expectation of a June rate hike from the Fed, and bearish on Sterling with the UK election outcome uncertain. Fast forward to the middle of May, and the US Dollar has been on the back foot, with the rate hike expectations “data dependent” and more likely to be September. The UK general election came last week, with the Conservative Party defying the opinion polls in the election build up, securing a majority government.
Sterling rallied throughout the election night in the UK, as investor fears of a prolonged, unworkable government dissipated and the party seen as pro-business won the election. On Tuesday the ONS released manufacturing figures that were above expectations, firming the bid in cable.