The British pound came in for one of its worst weeks of the year this week after British Prime Minister Theresa May’s gamble to call early elections failed dramatically and now the UK if faced with a hung parliament and more political uncertainty.
The British currency hit an intraday low of $1.2632 on Friday after election results came in before recovering to $1.2736 at the close of the trading day.
With Brexit talks just days away, the election results could not have come at a worse time for May’s conservative party and some predict it will seriously weaken her hand in negotiations,
The only way out may be another election which will only cause further uncertainty and may leave the UK with a bad deal on Brexit and cause the pound to remain under pressure for the foreseeable future,
“Brexit talks are now likely to be even more unsettling for markets, and the prospect of another election raises the risk of a delay, potentially leaving the UK without a negotiated exit settlement,” said Mark Haefele, from UBS Wealth Management’s chief investment office.
“Although we believe the pound had already priced in much of the ‘hard Brexit’ risk before this vote, the currency will continue to experience volatility through the governmental and Brexit talks.” He added.
The only possible option for Theresa May besides calling new elections is to form a coalition government with one of the smaller parties but many say that won’t last long and the PM will have no choice but to quit,
“Theresa May’s electoral gamble has catastrophically failed,” said Tom Stevenson, an investment director at Fidelity International.
“The market reaction to this unwelcome outcome is likely to hit UK shares, bonds and the pound. Markets will likely remain on the back foot while the difficult job of putting together a workable government is undertaken.” He added