CURRENCY EXCHANGE: Pound plunges after election setback for May

EDITOR’S NOTE: Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate in the week gone by.

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Who ever said that politics was boring?

The 2017 UK General Election concluded yesterday and the result was not as expected. Uncertainty creates fear and the market reacted to Thursday night’s exit polls with the pound losing over 2% in the blink of an eye. Prior to the results, anything other than a Tory majority was seen as a positive outcome whereas anything less could have only been detrimental to the market.

A Hung Parliament is what we’ve voted for. The Conservatives have managed to gain the most seats, but fell 8 short of the majority meaning they have to look around for some friends to help them form a government. The much criticised campaign by Theresa May was ultimately her demise and although she does remain as Prime Minister, the critics are out in force both from the Labour Party and more worryingly from within the Tories.

As I write, there seems no guarantee that Mrs May will not resign her post in the coming days.

She has of course had a busy day. In the search of friends she didn’t have to look too far as the Democratic Unionist Party’s 10 seats were all that she needed to claim the majority and take the house. The DUP have been happy to oblige as long as they ‘work together’ moving forward and the Queen granted the PM her permission to form a minority government. Jeremy Corbyn, who’s Labour party celebrated their loss like it was a victory has been extremely vocal over the outcome, rightly so perhaps as he did a very good job. His calls for May to resign is perhaps a little early however.

Developments over the weekend will be reported on of course but for now the pound is closing around €1.1250, it’s on a knife edge what happens next week but if you do need to move some funds then you are well placed to protect yourself in what will be an incredibly uncertain and volatile time.

Just when the dust will begin to settle next week, Brexit talks will begin. Quite who the Prime Minister is and what type of divorce we’ll be aiming to get remains to be seen of course.

Buckle up and enjoy the ride.

This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.

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