Much like the June 23 referendum, the British elections could yield some rather unexpected results.
With the British elections appearing not to provide a single party a clear majority, investors who had already weathered major risks in Europe and in the U.S., have now to absorb another blow.
As a result the sterling, at one point, fell by nearly 2%, before it gained more traction as the results waxed and waned.
Futures for the FTSE FFIc1 eased 0.3%, while yields on 10-year gilts GB10YT TWEB dipped by 3 basis points to 1.00%. Elsewhere, the damage was limited with E-mini futures for the S&P 500 ESc1 flat.
Just like the Brexit referendum, the shocking results of the British elections roiled investors when an exit poll showed the Conservative Party failing to clinch a clear majority.
The results will have a bearing on Brexit negotiations.
Early polling favoured the Labour Party however it left the outcome in doubt. As per a BBC forecast British Prime Minister Theresa May’s Conservatives party would get 322 seats and the opposition Labour Party 266 seats.
This will result in no clear winner.
May had called the snap elections in the hope of strengthening her hand hoping to sweep seats for a clear majority.
Betting agencies have already taken wagers that May would lose her job.
“It’s clear that the election is a humiliation for the Tories, who blew a massive poll lead in just a few weeks,” said Sean Callow, senior currency analyst at Westpac.
Callow has predicted a hung parliament which will strip the pound of its pre-election gains and leave it at around $1.2500.
“We could be heading for a period of market uncertainty, which will be compounded by the elephant in the room this time around — the forthcoming Brexit negotiations,” said Michael Judge, head of corporate dealing at OFX.
He went on to add, “Investment decisions are likely to be put on hold for the short to medium term — certainly until we have clarity on who governs the UK. At that moment, that is anybody’s guess.”