Pound hits highest since May 2018, FTSE 250 surges to record

The trade deal and the U.K. election results have given a boost to stocks around the world.

The pound soared with U.K. stocks on Friday and corporate bonds rallied after Prime Minister Boris Johnson’s Conservative Party won a huge majority in the British general election.

The resounding victory fueled investor hopes the political gridlock and uncertainty surrounding the country’s departure from the European Union will be brought to an end.

In a day of dramatic market moves:

• Sterling at one point was on course for its biggest gain against the dollar since April 2017.
• The FTSE 250 index of equities hit the highest on record as trading volumes soared to more than 400% above the 100-day average.
• A key gauge of credit default risk fell to the lowest in more than a decade.

By 10:58 a.m. in London the pound’s surge had eased, though it was still 1.7% higher against the dollar at $1.3392. It strengthened 1.3% versus Europe’s common currency to 83.483 pence per euro.

“To me this signals that the worst of Europe’s malaise is behind us,” said Jack McIntyre, a portfolio manager at Brandywine Global Investment Management in Philadelphia. “The results take away a key risk in markets, and while there are still issues with U.S.-China trade, this U.K. election is one of the big ones. Long sterling is our biggest currency position outright.”

The pound-denominated bonds of U.K. companies led a rally in European credit markets. Those issued by banks and companies which faced potential nationalization under a Labour government led the charge.

All the same, there were signs that traders now appear to be hoping for a respite in outsized market moves. A gauge of volatility for sterling over the next six months has fallen to the lowest level since January 2018 as markets foresee a period of calm before negotiations over a final trade relationship with the EU begin.