GBP tests critical $1.30 level as global stock markets falter

The British pound has seen a healthy recovery this week and is currently retesting the $1.30 level of resistance as the country anticipates a Conservative majority

The Great British pound (GBP) is retesting the $1.30 level of resistance following a 1.36% rally to the upside over the past week.

The resurgence of the pound comes after election polling put the Conservative party 68 seats ahead of Labour.

If this scenario was to play out, the December 12 UK election has the potential to produce the best result for the Conservative party since Margaret Thatcher was elected in 1987.

A Conservative win would see Great Britain swiftly leave the EU on January 31, which would alleviate fears surrounding the economical impact of Brexit.

If the Conservatives can gain a majority, the pound is expected to rise to 18-month highs, with the next levels of resistance at $1.35 and $1.38.

However, while currencies continue to look strong, global stock markets have taken a hit, with the FTSE 100 down by 2.16%.

Analysts remain bullish despite the stock market sell-off, with Wall Street bull Jeff Saut labelling it as an “early Christmas gift”, while Jim Cramer has said he’s “not worried”.

The automotive industry is among the hardest hit, with global car sales expected to see its sharpest decline since the financial crisis in 2008, despite European car sales rising by 8.6% in October.

It’s worth noting that the recent drop in global stocks comes after a staggering rally that saw the S&P500 reach a new all-time high in November.

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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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