The pound fell as much as 2% after a snap election saw Prime Minister Theresa May’s conservative party lose a majority in Parliament, the outcome most feared by analysts. One poll showed analysts believed the pound might dip to US$1.20 on Friday, should the election result in a hung parliament.
Despite uncertainty, the pound has stabilized above US$1.27 as of 9:30 EST, having only dipped below the US$1.27 mark briefly Friday morning.
A poor showing for the Scottish National Party, which favors Scottish independence, may have provided some support for the pound, but the steadying probably indicates a wait-and-see approach, as Theresa May forms a fragile government with support from the small North Irish party.
“We must consider that a political risk premium will hang over the pound for the foreseeable future,” Stephen Gallo, a foreign exchange strategist at Bank of Montreal was quoted by the FT as saying. This will “put a ceiling on the pound”.
The FTSE 100 was up as much as 0.80% Friday afternoon in London, while the more UK-focused FTSE 250 was trading down 0.25%.