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General election 2015: How exit polls impacted the financial world

Shané Schutte - Deputy Editor, Real Business
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Before the poll was released, Royal Bank of Canada currency strategist Adam Cole said: “A better showing for either the Conservatives or Liberal Democrats that gets the two together close to a majority would likely see GBP trade increase sharply.”

And it has. The UK currency climbed up to 1.1 per cent to $1.54 against the dollar in a number of minutes after the exit poll on 7 May suggested the Conservatives were on course to win 316 of the 650.

Since then, the pound jumped two per cent to $1.55 against the dollar. This has been its biggest jump since 2009.

Market analyst Louise Cooper claimed the pound could still increase further. “Markets hate uncertainty,” he said. As Cameron has been prime minister for the last five years, they know more or less what to expect.

In the meantime, the pound also gained two per cent against the euro to €1.38.

Investors pushed the UK’s ten-year gilt yields above two per cent on 6 May for the first time since December 2014. This figure has tumbled to 1.84 per cent, meaning that the cost of borrowing has fallen.

Shares have also surged this morning. Spread-betting firms are calling the FTSE 100 index up around 100 points. 

Stan Shamu, analyst at IG, said: “With the Conservatives appearing to have gained ground and unexpectedly gaining seats, this seems like it is the market friendly result. It remains to be seen how many additional seats the Conservatives will need from a partner but with the current projections it will be a tiny amount. Election talk is likely to spill over into the weekend and it’ll be interesting to see how long the momentum in the FTSE and sterling can last.”

According to Nick Serff of City Index, investors see the UK as a safe haven again. “Gilts are a good place to place their money,” he said. “The result takes the uncertainty out of it”.

Summed up in one, the City businesses are looking at a similar picture to this one:

It’s also been suggested that the sight of Cameron reclaiming Downing Street has sparked some interest from foreigners looking to buy houses in London.

Michelle van Vuuren, MD of Residential Development at Sotheby’s International Realty UK, echoes this sentiment. She said: “A Conservative victory – whether outright or otherwise – will give the housing market what it wants: stability. At the top end – for the next five years at least – a cessation of the clamour for a Mansion Tax will see a number of transactions that have stalled to come back on line as certitude creeps back into the market. It is going to be an exciting time to be in the London market over the Summer! We are already taking calls from international buyers who want to get back into the market.”

But Jeremy Cook, chief economist at currency exchange firm World First, is convinced that financial markets will want to know what will be happening in terms of Europe and Scotland.

He said: “Nicola Sturgeon must decide what she does with her seats. Does she build a left-unity coalition, or keep banging the independence drum?”

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