Sterling Pound Suffers After UK Election Shock

Sterling suffered its steepest daily fall of 2017 after a shock election result denied any party a majority in parliament days before Brexit negotiations begin. In a frenetic trading session, the pound nose-dived by as much as 2.34pc to an eight week low of $1.2690. Against the euro, it collapsed to a seven-month low of €1.1287.

However, the local currency recovered some of its losses in afternoon trade after Prime Minister Theresa May said she would form a government with help from Northern Ireland’s Democratic Unionist Party. Ms Punhani says the odds of the pound skidding to a range of $1.20-1.25 against the US dollar over the coming weeks have “certainly increased” as investors digest the fallout of the shock election result. “Unless a clear sense direction manages to emerge from the ashes of yesterday’s vote, we remain skeptical about the ability of the pound to recover its losses,” she added.

Meanwhile, the one-month sterling-dollar risk reversal, a gauge of the balance of bets on the pound rising or falling over the next month, tumbled to a nine-month low during yesterday’s trading session, before recovering to touch a one-week high. Jordan Rochester, FX strategist at Nomura, said: “Sterling volatility is the winner, as the direction over coming weeks is still very uncertain.”

On equity markets, London’s FTSE 100 benefited from the pound weakness, as more 60pc of companies listed on the index are foreign earners. It enjoyed its best day since late April, closing 1pc higher at 7,527.33, while the more domestically-focused FTSE 250 ended 0.1pc higher.

Courtesy: Telegraph

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