Pound volatility as conservatives look to lose their seat majority

June 9, 2017 09:26 AM

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All eyes are on the British pound, and there has already been a shock in the early hours of trading on Friday that led to the pound taking a dive all the way from 1.2950 to below 1.27 following increasing concerns that the UK is heading for a hung parliament

The pound is looking under severe pressure with polls indicating that the conservatives will lose their parliament majority, which looks like another example of traders being on the wrong side of the trade after heavily stacking their cards in favour of a landslide victory for UK Prime Minister Theresa May when pricing in the UK election.

From a market perspective, a hung parliament is seen as one of the worst possible outcomes to this election because it just injects further uncertainty into the United Kingdom as it heads into Brexit negotiations with the European Union. The whole reason for the unexpected announcement of a snap election from Theresa May was to gain a more dominant hand when representing the UK in negotiations, but this outcome would suggest it has backfired and ultimately will result in the door being opened even wider when it comes to the UK entering further political uncertainty.

If the momentum of the votes begins to shift in favor of what the preliminary polls have suggested will be a hung parliament, the pound will be at risk to retracing all of its gains that has made since Theresa May unexpectedly called the election. This ultimately means that the pound could drift to 1.25 within the next few hours if market uncertainty heats up. 

 

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