United Kingdom vote roils pound, biggest drop since October
- Author: Zachary Reyes Jun 11, 2017,
Jun 11, 2017, 6:46
Having secured 318 seats so far (just one more constituency needs to declare its result), it falls short of the 326 required for them to win a majority-led parliament.
The exit poll predicted the ruling Conservatives would win 314 seats in the 650-member parliament and the opposition Labour Party 266, meaning no clear victor.
Bill Street, head of investment for EMEA at State Street Global Advisors, commented: "While sterling weakened in the final weeks of the election campaign, markets still expected a Conservative majority, therefore this initial sterling weakness is no surprise and is likely to continue as worldwide investors demand a higher risk premium".
Craig Erlam, Senior Market Analyst at OANDA, said: "The initial exit poll suggest it's been a catastrophic campaign for Theresa May".
The shock outcome saw the pound shed as much as three US cents at one point, or close to 2 percent, on fears the political turmoil could delay, and complicate, Brexit talks, which are due to start in 10 days.
"If accurate, a hung parliament leaves Theresa May's position as leader in serious doubt and makes the process of Brexit incredibly uncertain". Construction groups such as Balfour Beatty dropped sharply on worries that a hung parliament could slow down the award of government contracts. Indeed, as the ramifications of this vote become clearer, the falls against the U.S. dollar and other currencies could become more pronounced'.
"Uncertainty about the United Kingdom government is probably bad for the [U.K.] currency in the short term but could be quite good for the economy", said Ben Kumar, investment manager at Seven Investment Management.
Sterling has been trading in a range between $1.28 and $1.30 in recent weeks.
"Even though we're seeing higher sterling volatility, there's even less prospect of that spilling into broader markets", Ray Attrill, head of foreign exchange strategy at National Australia Bank Ltd.in Sydney, told Bloomberg TV.
For others, the result leaves the country little further forward than before the decision to call a snap election.
Carolyn Fairbairn, the CBI's director general, said: "For the next Government, the need and opportunity to deliver an open, competitive and fair post-Brexit economy that works for everyone across all our nations and regions has never been more important".
The Pound plummeted by almost 2% against the Euro overnight on Thursday as it became clear that the election vote resulted in a hung parliament. A Bloomberg survey of 11 banks and brokerages conducted before the exit poll showed that sterling could plunge to as low as US$1.20 today while the median forecast for a level of US$1.2350.
When May called the election in April, she did so with the Conservatives riding high in the polls, and the pound had surged on expectations that a big majority for the Conservatives would allow her to face down the so-called euroskeptics in her parliamentary ranks.