The pound has dropped significantly against the U.S. dollar and the ringgit, where it dipped below the $1.27 mark as of 9am Friday.
Against the ringgit, the pound went from RM5.53 to RM5.43 in a matter of hours. This sudden seismic move downward of the pound follows an exit poll that showed that the Conservatives will not secure a clean win to form a government.
The British parliament has 650 seats, and a single party needs to win at least 326 seats to govern without a coalition partner. The exit polls show Conservatives could win 314 seats, not enough to form a government.
FXTM Vice President Jameel Ahmad said the pound is looking under severe pressure with polls indicating that the Conservative party will lose their own parliamentary majority.
"This is resulting into a strong selling pressure on the British currency,” he said.
The ringgit, one of the world’s worst performing currencies last year, saw a resilient comeback in 2017 with the local note strengthening to levels last seen back in September last year. The ringgit is trading at RM4.27 to the dollar and is doing well against the pound as well, even before the elections.
Jameel Ahmad remarked that “(while) this is not yet confirmed, a hung parliament is seen as one of the worst outcomes heading into a crucial Brexit negotiations”.
This is especially true since the premise of the snap polls announced by British Prime Minister Theresa May was that it was to enhance a stronger mandate for her to go into these negotiations, which is estimated to take place for the next two years.
Singapore based OANDA senior FX Trader Stephen Innes gave a rather dynamic outlook.
"Price action has confused more than a few as a (British) hung parliament was expected to drive Sterling below 1.2500 to the dollar," he said.
"As we near the wire of the result, the Sterling is surging higher towards 1.2800 as pollsters are a throwing caution to the wind and predicting that the Conservatives may now win 322 seats," he added.
It is unclear what the results of the general elections are, but what is certain is that while the Conservatives could end up winning the most votes, they would still fall short of gaining a majority. And the focus is no longer on Brexit, but on who the constituents for a coalition government would look like. And pundits are not writing off a Labour-dominated government just yet.
Ibrahim Sani
Fri Jun 09 2017
The pound is looking under severe pressure with polls indicating that the Conservative party will lose their own parliamentary majority.
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