Political uncertainty to hit sterling

Currency experts are predicting a rocky ride for the pound following the general election result which left Theresa May short of an outright majority.

Berry FX founder, Richard Berry, commented: “The pound dived sharply overnight when the exit polls came in and has been stumbling through a wasteland ever since. What should have been a coronation for the prime minister, and a sustained boost for the pound, has turned into a political and economic Mayday.” Berry added that as opinion polls correctly predicted the outcome, the result was less of the shock than the Brexit referendum.

The political instability will weaken the government’s hand in Brexit negotiations, according to currency experts. FEXCO Corporate Payments head of dealing, David Lamb, commented: “The Prime Minister had hoped to begin Britain’s Brexit negotiations this month with a thumping mandate and a spring in her step. Instead she will do so walking on eggshells and looking nervously over her shoulder for cabinet members wielding knives.” Lamb said that while this could lead to a softer Brexit deal than expected, this is currently too theoretical to have a bearing on markets. However, Berry said: “There are so many variables in play that the pound could even rise in the days ahead as the likelihood of a soft and more palatable Brexit increases. As perverse as it seems, political chaos could ultimately translate into sterling strength.”