On Wednesday, the British Pound jumped near $1.30 against the US Dollar for the first time in more than eight months, capping off a near 6% rise this year and making up all of its losses after the currency suffered a “flash crash” back in October.
Prospects for the post-Brexit vote have brightened after the UK prime minister’s decision to hold a snap general election, which is expected to deliver a boost to the Tories’ parliamentary majority on June 08. The currency is up 3.5% against the Dollar since the announcement last month and 1.2% against the Euro.
Meanwhile, the Bank of England was scheduled to release its policy decision later in the same day alongside its quarterly Inflation report. The Euro’s post-vote stumble continues, with the currency hitting new lows after the election of Macron as president of France. Now that political risks in the Eurozone have been priced out, attention increasingly focuses on monetary policy; and the market is optimistic that the European Central Bank’s (ECB) will take small steps towards tightening policy in June. However, Mario Draghi said on Wednesday as well that it is too early for the ECB to declare victory in its quest to boost Eurozone inflation despite signs the bloc’s economic recovery is firming.
Draghi’s comments confirmed that he is in no rush to raise rates or wind down the ECB’s 2.3 billion Euro Bond-buying program despite insistence from richer Eurozone countries.