Pound takes a beating as Tory lead crumbles
Theresa May’s gamble backfires and UK currency tumbles
THE POUND tumbled as the UK’s ruling Conservative Party lost its parliamentary majority, plunging the country into uncertainty just days before Brexit negotiations were due to start. Crude advanced and the dollar strengthened.
Sterling dropped the most in five months as the election intended to strengthen Prime Minister Theresa May’s hand in negotiations with the EU instead left her battling to survive. The currency’s retreat gave the British benchmark stock index a boost, but the election’s impact beyond the UK was muted. The euro extended losses to three days, and the Stoxx Europe 600 Index fluctuated.
While fallout from the election is roiling British assets, investors may be relieved about its limited impact elsewhere. The vote capped a series of major events this week that had the potential to change the tone of financial markets globally, most of which passed with relatively little fuss. Attention will now turn to the week ahead, when the Fed is expected to raise interest rates and the Bank of England, the Bank of Japan and the Swiss National Bank also meet.
“For now, the results of the UK elections do not appear to be threatening the global growth story,” Mark Haefele, global chief investment officer at UBS Group, said. But for Britain, “political uncertainty is likely to more than offset any benefit from a marginally weaker pound,” he said. – Bloomberg
Stock market information is displayed on an electronic screen on the trading floor at ETX Capital in London as the political uncertainty in the UK continues.