Value of pound rises to two-and-a-half year high against euro as Conservatives gain ground in polls

The pound’s value is rising against both the euro and dollar asthe Conservatives gain ground in general election polls.

Sterling has reached a two-and-a-half year high against the European currency, with £1 worth around €1.19.

This is the highest level since before the 2017 vote, in which Theresa May’s majority collapsed.

The price of the pound is also up against the dollar, with £1 worth $1.32, the highest in seven months.

The expectations that the Conservatives will win an outright majority has boosted the pound in recent days.

Investors hope it will lead to Parliament approving the Brexit that Boris Johnson has secured with the EU.

But future sterling gains are likely to be limited, given that Britain will have to negotiate a new trade deal with the European Union after formally exiting the bloc on January 31. The time allocated for this is less than a year, which analysts say is an impossible task.

“Sterling can get to $1.34/$1.35 if there is a Conservative victory, then its appreciation will be capped by what the Conservatives have pledged in terms of the spending offered and renewed Brexit uncertainty,” said Jordan Rochester, Nomura’s currency strategist.

British officials have also questioned whether Johnson’s claim that Britain will make a clean break with the EU in December 2020 can be achieved, fearing that a new customs arrangement for Northern Ireland may not be ready in time, the Financial Times reported.

This “points towards the likely need for an extension to the transition period beyond the end of next year, something Boris Johnson has pledged not to request,” said Lee Hardman, currency analyst at MUFG, adding that “it leaves open the risk of a no-deal Brexit towards the end of next year”.

“Once the initial euphoria fades over a positive UK election outcome, it will become more challenging for the pound to extend its advance in 2020,” he said.

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