Dollar cleans up as United Kingdom election shock stuns sterling
- Author: Zachary Reyes Jun 10, 2017,
Jun 10, 2017, 12:45
Sterling fell as low as $1.27, down about two and a half cents from its level late on Thursday.
The pound plunged during United Kingdom election night shortly after an exit poll correctly forecast that prime minister Theresa May's Conservative party would fall short of winning a parliamentary majority. Yields on 10-year gilts fell 3 basis points to 1.00 percent.
Tom Elliott, DeVere Group's global investment strategist, believes a Tory majority of more than 60 would "vindicate" May's decision to call an election, and enable her to "effectively ignore the estimated 30 or so Conservative MPs who want as hard a Brexit as possible".
Later projections gave the Conservatives a handful more seats but a raft of analysts predicted that would not head off more falls for the pound.
If U.K. Prime Minister Theresa May pulls off an election victory on Thursday, the pound will likely stage a rally, analysts at Macquarie said in a note on Thursday.
As far as investors are concerned, sentiment surrounding the pound will dictate the fortunes of the stock market, as it has done repeatedly over the past year. The Fed ends a two-day meeting on Wednesday. The dollar index against a basket of major currencies was up 0.3 percent at 97.221.
Sterling plunged to a seven-month low against the euro and was headed for its biggest single-day drop against the dollar since October. But yields have since bounced from the lows as risk aversion ebbed.
Comey accused Trump of firing him to try to undermine the investigation into possible collusion by his campaign team with Russia's alleged efforts to influence the 2016 election. While this was the most eagerly anticipated US congressional hearing in years and was approached by investors with caution, it did not offer fresh insight for the financial markets.
The pound fell sharply after an exit poll in Britain's election forecast that the Conservatives would fall short of a majority in parliament, raising the prospect that the country might not have a clear victor or strong government as it starts its negotiations to leave the European Union.
The pound has been going through a volatile time recently, due to a series of political events and the election will no doubt have an affect on its value.
Paul Mumford, manager of the Cavendish UK Opportunities fund, expects the pound's fortunes to be boosted in this scenario, but he sees market benefits nonetheless.
In commodity markets, spot gold was 0.3 percent lower at $1,274.45 an ounce.
The euro had less luck on the USA dollar, easing 0.3 percent to $1.1182 and testing support under $1.1190. The Australian dollar shed 0.2 percent to $0.7533 as the greenback firmed. Wednesday's GDP release for the first quarter has been downgraded by one economist who now sees a contraction of 0.5% (quarter-over-quarter) against an earlier forecast of expansion at 0.03%.