Pound dragged down by uncertainty

Political uncertainty dragged on the pound after a delay to the Queen’s speech raised further speculation over the future of Theresa May’s fragile Government.

Sterling was hovering at eight-week lows against the US dollar, down more than 0.7% at 1.264, having tumbled from preelection highs of 1.295 last week.

Versus the euro, the pound dropped nearly 0.8% to sevenmonth lows at 1.129

Equity markets also suffered, with the FTSE 100 ending the day lower by 0.2% or 15.46 points at 7,511.87.

Markets were reflecting investor jitters around the future of the UK Government after last week’s surprise election result, which left the Conservatives short of a firm majority and seeking a “confidence and supply” deal with Northern Ireland’s Democratic Unionist Party.

This would ensure that the Government receives support for its budget and confidence motions.

David Madden, a market analyst at CMC Markets UK, said: “Traders despise uncertainty and that is exactly what we have got. By delaying the Queen’s speech, the UK is sending out a message of instability, when it badly needs clarity.

“Dealers will be determined to avoid the pound until they are given some positive news about Theresa May’s government.

The French Cac 40 and German Dax ended the day down 1.1% and 0.98%, respectively.