Pound struggles to recover in after shock British vote

Britain’s opposition Labour party Leader Jeremy Corbyn gives a thumbs up as he arrives at Labour Party headquarters in central London on June 9, 2017 after results in a snap general election showing a hung parliament with Labour gains and the Conservatives losing its majority. British Prime Minister Theresa May faced pressure to resign on Friday after losing her parliamentary majority, plunging the country into uncertainty as Brexit talks loom. The pound fell sharply amid fears the Conservative leader will be unable to form a government and could even be forced out of office after a troubled campaign overshadowed by two terror attacks. / AFP PHOTO / Daniel LEAL-OLIVAS

The pound struggled on Monday to bounce back from last week’s sharp losses triggered by a shock British election result that has thrown the country into uncertainty.

Sterling took a beating on Friday after Prime Minister Theresa May’s ruling Conservative Party lost its Westminster majority, days before it starts crunch talks with the EU on exiting the bloc.

May called the election three years early in a bid to strengthen her hand in looming Brexit negotiations, but the gamble backfired spectacularly and now she must rely on the support of Northern Ireland’s Democratic Unionist Party.

“With May’s leadership teetering on the brink, the UK steps ever so closer to the calamitous Brexit cliff edge scenario,” Stephen Innes, senior trader at OANDA, said in a note.

“Certainly, prolonged uncertainty would argue for a deeper correction on sterling as May’s diminished Brexit mandate scenario plays out.”

The pound sank to a seven-week low of $1.2636 at one point Friday before recovering slightly. In Asian trade Monday it was at $1.2729.

– ‘Buzz kill’ –
On equity markets technology firms tumbled, in line with losses in New York, where the Nasdaq was dragged down by big losses in big-name firms including Apple, Microsoft and Google parent Alphabet.

In Tokyo, Sony lost 1.2 percent and Sharp dived more than three percent, while in Seoul Samsung lost 1.6 percent. Hong Kong-listed Tencent was more than two percent off.

On broader markets Tokyo ended 0.5 percent down, while Hong Kong shed 1.2 percent and Seoul gave up one percent. Taipei slipped 0.9 percent and Shanghai closed 0.6 percent down.

“There’s a chance US internet technology stocks that have propelled a global stock rally will now serve as a buzz kill,” Mitsuo Shimizu, deputy general manager at Japan Asia Securities in Tokyo, told Bloomberg News.

Analysts described the movements as a rotation, in which investors were taking profits from highly valued sectors and putting the funds in areas that have underperformed, such as financials, energy and retailers.

Dealers are now waiting for the Federal Reserve’s next policy meeting, which ends Wednesday. While the central bank is widely expected to raise interest rates, its post-meeting statement will be pored over for clues about policymakers’ plans for future increases and their view on the world’s top economy.

The euro edged up slightly as it became clear that the party of new French President Emmanuel Macron was heading for a huge majority after Sunday’s first round of voting for the National Assembly.

In early European trade London slipped 0.5 percent, Paris eased 0.4 percent and Frankfurt was off 0.3 percent.

– Key figures around 0820 GMT –
Tokyo – Nikkei 225: DOWN 0.5 percent at 19,908.58 (close)

Hong Kong – Hang Seng: DOWN 1.2 percent at 25,708.04 (close)

Shanghai – Composite: DOWN 0.6 percent at 3,140.45 (close)

London – FTSE 100: DOWN 0.5 percent at 7,493.36

Pound/dollar: DOWN at $1.2729 from $1.2738 at 2050 GMT on Friday

Euro/dollar: UP at $1.1212 from $1.1197

Dollar/yen: DOWN at 110.24 yen from 110.26 yen

Oil – West Texas Intermediate: UP 22 cents at $46.05 per barrel

Oil – Brent North Sea: UP 25 cents at $48.40

New York – Dow: UP 0.4 percent at 21,271.97 (close)


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