E British Elections Bring More Uncertainty On Brexit Negotiations

The British pound faced steep losses on Friday after the UK went to the polls on Thursday. As vote count started, it was evident that the ruling Conservative Party was losing the majority it had.

By Friday’s close, the UK faced another split election giving no major party a clear majority which clouded investors’ decisions. This comes ahead of the scheduled UK – EU talks that are set to start from June 19.

UK General Elections 2017: A Hung Parliament
Investors were clearly divided with the outcome from here looking uncertain as the United Kingdom looks to break away from the EU. This led many to keep away from the markets. The general perception was that Conservative leadership would lead to a soft-Brexit. A soft-Brexit is perceived to be good for the economy, but it would still make the exit talks very uncertain and unpredictable.

The British pound was clearly volatile, falling to 1.264 briefly on Friday. This was the lowest level seen since April when the Prime Minister Theresa May called for the snap elections, just a month after she invoked Article 50.

With the hung parliament now a reality, the market outlook remains uncertain. Worries about the political outlook in the region certainly dented investor sentiment and are likely to affect investment in the country.

This was clear with the banking stocks that came under pressure on Friday. Concerns that a Labour Party could form the government and the potential policy decisions are keeping the stocks in check as well.

Despite the uncertainty, some experts believe that the market reaction to the UK elections on Friday was relatively calm.

Uncertainty expected to continue
Geoffrey Yu, from UBS Wealth Management, said, “The market is absorbing this result much better compared to the Brexit result, but a lot will depend on how things develop.”

Various other analysts have also come out with mixed projections for the British pound, although the prevailing consensus is to stay on the sidelines for the moment.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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