At 10 pm last night, the Pound took a major hit as exit polls pointed to a hung Parliament. Buying rates for the Euro and Dollar fell by over two cents, and Theresa May’s gamble hasn’t paid off well at all. Fortunately, the losses for Euro and Dollar buyers haven’t continued, and they seem to have leveled out considerably. While that’s great news, there’s no reason to suspect that this is the end.
All of the recorded losses occurred prior to European markets being open to trade on the news, which means there might be more to come as mid-morning approaches.
The second problem could be snap decisions, and all of the different routes that these election results could take before the end comes. As many of you know, GBP/EUR GBP/USD, and GBP/AUD rates will depend heavily on the decisions made throughout this election.
The results, along with the views of the parties show us that the formation of a coalition government led by either Labour or conservative would be nearly impossible. The only other options available would be a minority government, or call for a new election. It is likely, however, that Theresa May will be announcing her resignation.
One conservative source recently said that Theresa May is 50/50 to go, and she’s made hints at Conservative HQ that there ‘will be a significant change’. While all of this is hearsay, there is no doubt that she is responsible for a major blow to the Conservative Party’s mandate and power.
Politics always come with a certain risk, and there is definitely some uncertainty in the air. With most political moves or events, you will see stagnation or deterioration in the Pound’s value, meaning there is significant risk to anyone holding Sterling that wishes to purchase foreign currency.
Developments will continue to emerge, though it is unlikely that there will be much warning. That said, if you are currently holding Sterling and wish to exchange for a foreign currency, you take advantage of the momentary improvement, before more changes come our way, and the value of the Pound drops even further than it already has. It’s better to be safe than sorry.