Update: The DUP may have thrown the Conservative Party a lifeline today, offering to informally back them in Parliament to give Theresa May just enough seats to secure a majority. Talks between the two party leaders will take place this weekend and hope of an agreement has allowed the Pound to hold in positive territory as the session draws to a close.
The Pound US Dollar exchange rate has fallen nearly 2% before rebounding marginally higher on the back of the general election exit polls.
The GBP USD exchange rate slumped from 1.29 to 1.27, briefly bouncing back above 1.28 but then slipping again towards its low.
Released when the ballots closed at 10.00, the survey has suggested that the UK has voted in a hung parliament, with the Conservative Party projected to lose -17 seats – and therefore the majority – to end up with 314.
Labour are projected to gain 34 seats for a total of 266; the Scottish National Party are forecast to lose -22 seats and hold on to 34, while the Liberal Democrats are expected to improve their share in Parliament from 8 seats to 14.
GBP USD Drops; Has Theresa May’s Gamble Backfired?
The Prime Minister could be left with egg on her face after calling the snap general election in the hope of using her strong lead over Jeremy Corbyn in the polls to firm up her position in Parliament.
Predictions immediately after the election was announced claimed that the Conservatives were on track for a landslide victory, which markets interpreted positively, buying up the Pound.
A stronger Conservative majority would make the Brexit process run more smoothly – and while markets don’t necessarily actually want Brexit, they would prefer a smooth Brexit to a messy divorce from the European Union.
In the eyes of investors, the former option at least offers less in the way of uncertainty.
But the exit poll indicates that this could be a pipedream; polling expert Professor John Curtice of Strathclyde University, speaking on the BBC’s live election coverage, has claimed that it is likely Theresa May has ‘failed’ in her attempt to firm her majority, even if the Conservatives do end up performing better than his poll suggests.
Pound Sterling Exchange Rates Plummet After Poll Findings Revealed
The GBP/USD exchange rate immediately crashed to a seven-and-a-half-week low once the findings were announced, even though the polls are not always reliable and there could be a significant margin of error.
The Pound also tumbled against the Euro following the release of the data.
Perhaps unsurprisingly, the results already announced indicate that the Conservatives are performing particularly well in areas that showed strong support for the ‘Leave’ camp during the EU referendum, while Labour is thriving in areas with a strong leaning towards ‘Remain’.
It looks as if the UK will truly be stuck with a hung parliament, as a coalition to overpower the Tories is highly unlikely.
If the exit polls are correct, it would take an alliance of Labour, the Liberal Democrats, the SNP and the Green Party to overpower the Conservative Party – and even then only by one seat.
Additionally, the Liberal Democrats have tweeted that they would not accept a deal or a coalition with any other party, leaving the UK facing the prospect of five years of political deadlock.
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