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Pound strengthens against Dollar, after Tory majority

The pound Sterling has hit a two month high against the dollar after news of a Tory majority in the general election.

The value of the pound rose to the highest level since the end of February, adding 1.75% against the dollar overnight. The FTSE 100 also responded in a positive manner and was up by over 100 points by midday.

According to analysts, the main factor behind the growth is the fact that a Tory majority means that the current austerity programme will continue, as will the ongoing reduction to national debt. Sterling rose strongly after the exit poll at 10pm and continued to strengthen through the night as election results came in, rising almost three cents against the US dollar by 5:30am.

Alan Clarke, income strategist at Scotiabank said: “Against the odds, on the basis of the exit poll seat projections, a second Conservative-Liberal Democrat coalition looks a distinct possibility.

“This is most likely to come as a pleasant surprise to financial markets. Our judgment is that the markets were bracing for a messier outcome where the Labour party would be reluctantly propped up by the SNP.”

However, according to some analysts, there are fears over the future growth of the pound if the Conservative’s continue with the planned referendum on European Union membership. Clarke says that this is the biggest concern at present, saying he fears “the prospect of an EU referendum as promised by David Cameron if he is still prime minister.

Chris Beauchamp, a senior market analyst at IG added: (In the event of an EU referendum) “We could see the pound drop back as this realisation sinks in”.

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