BBC News - Pound at two-month dollar high on signs of Cameron win

The pound has rallied against the US dollar as the UK election results suggest David Cameron will remain as prime minister.

Sterling jumped nearly 2% to $1.55 against the dollar, before pulling back.

The FTSE 100 opened higher in London, as investors welcomed the end of election uncertainty.

The BBC forecasts that the Conservatives will be able to command a slender majority.

'Consistent' government

Analysts said sterling jumped because the projected result meant the government's agenda was likely to stay consistent.

"The market often likes a bit of consistency and stability and if the Conservatives are returned to power - be it as part of a minority government or as part of a coalition again - they will be able to push through a lot of the policies and approaches that they have done over the last five years in parliament," said Jason Hughes from trading firm CMC Markets.

However, analysts said the rise could be short-lived as uncertainty over a possible "Brexit" or Britain leaving the European Union affects trading, with a referendum on the UK's EU membership now likely.

Bill O'Neill at UBS Wealth Management said: "Sterling will, in our view, be moved by a number of different factors in the coming days and weeks.

"It could hold the initial gains following the astounding exit polls last night but the Brexit and Scottish devolution debates might influence the path of the pound quicker than we think."

But CMC's Mr Hughes said that, for now, the "relief" rally that the currency was seeing could gain more momentum during European trading hours.

"If you look at the uncertainty that has been in play, almost since the start the of year, but certainly from about mid-February onwards, we've seen a fair bit of pressure on sterling due to the uncertainty of the political landscape locally," he said. "So I think we will see that relieving bounce."