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Dollars to GBP Exchange Rate Slumps after UK General Election Announced

21 April 2017

The dollar recovered on Wednesday, a day after hitting a three-week low against major currencies on lowered expectations for US interest rate hikes and concerns about President Donald Trump's ability to deliver a promised fiscal boost.

After the British pound took centre-stage on Tuesday with its second-largest one-day rise since 2008, the Australian dollar was the biggest mover on major currency markets on Wednesday, sliding 0.7 per cent as iron ore prices took a dive. "Our estimations suggest the market has priced in a lot of the negativity associated with Brexit, with today's developments starting to reverse some of that pricing". The euro fell to $1.0714 from $1.0731.

May's surprise decision to hold an early election on June 8 sent sterling to its highest level since early October on hopes that a stronger majority for May, who leads the opposition Labour party by 21 points in opinion polls, will deliver a more orderly exit from the European Union.

Theresa May
GETTYTheresa May levelled a hefty kick at the pound on Tuesday after her announcement

Britain's top share index came under pressure once again on Wednesday, giving up the gains it had made in 2017 as sterling held close to a six-and-a-half-month high after Prime Minister Theresa May called for a snap general election. The dollar index, which tracks the greenback against a basket of six rival currencies, edged up 0.1 percent to 99.633, pulling away from its overnight low of 99.465, its deepest trough since March 28.

"We expect that the PM's gamble is likely to buy her more time as well as room for maneuver in the Brexit negotiations as she will depend less on fringe groups in her own party", said Citi's chief global political strategist, Tina Fordham.

A run of disappointing United States economic data and doubts the Trump administration will progress with tax cuts have quelled expectations of faster inflation and boosted fixed-income debt.

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Despite these tensions, Wall Street posted its first session of gains in four, as investors turned their attention to first-quarter corporate earnings.

The FTSE 100 lost 0.1 percent to settle at 7,142.30, while France's CAC 40 soared 0.2 percent to 4,999.18 and Germany's DAX added 0.2 percent to 12,025.24.

It was flat at 83.63 pence per euro.

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Oil prices slipped as US crude stockpiles fell by less than expected and a USA government report said shale oil output in May was likely to post the biggest monthly increase in more than two years.

With less than a week to go before the first round of a French presidential election in which the top four candidates are polling neck-and-neck, the single currency was struggling broadly and fell to as low as 84.51 pence, the weakest since late February 24.

Brent crude was last little changed at $54.93 a barrel, while US crude was also steady at $52.42.

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Dollars to GBP Exchange Rate Slumps after UK General Election Announced