The pound is rallying as it recovers from a post-election dip

LONDON – The pound is up against the dollar and euro on Tuesday morning as it continues to stabilise following a post-election dip.

Sterling dropped sharply on Thursday evening after the exit poll initially showed that no party would win a majority in the House of Commons and resumed its sharp slide in early trade in London on Friday morning after it became clear that the election had returned a hung parliament.

However, after news broke that May would visit the Queen and seek to form a new government, the currency stabilised, and the market remained calm after she officially confirmed that she will lead that government.

As of 8.13 a.m. BST (3.13 a.m. ET) the pound is up 0.19% against the greenback. Here is the chart:

source
Investing.com

And here’s how it looks against the euro:

source
Investing.com

In focus will be UK inflation figures, with investors looking for any increase in the consumer price index, with Bank of England governor Mark Carney citing post-Brexit weakness as the main driver of inflation.

Konstantinos Anthis, an analyst at ADS Securities, writes in a morning note: “The British pound will make headlines today in light of the release of the inflation figures scheduled for early in the afternoon.

Unfortunately for the sterling bulls, the inflation report is expected to print in a bearish manner this month on the back of lower energy prices.The pound has been in the red since last week following the General elections’ result and PM May’s loss of the majority in the Parliament.

“The pound has been in the red since last week following the General elections’ result and PM May’s loss of the majority in the Parliament. The bias for sterling remains negative and a move below the $1.265 lows would expose the $1.26 level.However, do keep in mind that any Dollar weakness following the Fed meeting might limit pound’s losses against the Dollar making the Euro a more appropriate currency to sell the Sterling against.

“However, do keep in mind that any Dollar weakness following the Fed meeting might limit pound’s losses against the Dollar making the Euro a more appropriate currency to sell the Sterling against.”