22:42

The pound has surged after exit polls showed Boris Johnson’s Conservatives were on track for the biggest majority in more than 30 years, as investors in the City bet the outcome would lift some of the intense political uncertainty hanging over the British economy.

Immediately after publication of the exit poll which showed the Tories were on track for a majority of 86, sterling jumped by more than 2 cents against the US dollar to trade at about $1.35 on the international money markets. The pound also rallied strongly against the euro, gaining by a similar amount to €1.21.

The pound had risen earlier this week to the highest level since before Theresa May lost the Conservatives’ majority three years ago, reflecting polls showing that the prime minister’s party was on course for a majority.

City analysts had largely expected a Tory majority.

Despite the sharp rise in sterling as investors bet the outcome would bring clarity to British politics, significant uncertainty still remains over Brexit that are likely to influence movements in the pound in future.

Sterling has tended to fall on the prospect of tougher trade barriers and gained on news of closer ones. Fears over no-deal Brexit have sent the currency plunging. Chris Beauchamp, the chief market analyst at the financial trading firm IG, has said:

A tough few months, and maybe even years, of negotiation lie ahead, but at least now the UK government knows it has the will of the people and parliament behind it. UK assets may now finally play catch-up with the rest of the world, as investors return to the country.