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Sterling’s fortunes have reversed since the announcement of the snap election in mid-April, burning those who had priced in an appreciation of the rallying pound.
Prime minister Theresa May was predicted to comfortably win a Conservative majority, but seven weeks is a long time in politics, and the Tories ended up scoring an own-goal by losing 13 seats.
The result left a hung parliament, as no party won enough seats – 326 or more – to secure an outright win. The Conservatives won the majority of the vote – 318 seats versus Labour’s 262 seats – and are working on building a coalition with Northern Ireland’s Democratic Unionist Party.
Regardless, analysts say sterling is on shaky ground.
Cable – the pound against the dollar – fell from a pre-election level of $1.2956 to $1.2653 in the early hours of Friday, before cautiously rebounding.
Hetal Mehta, senior European economist at Legal & General Investment Management, says: “The sterling/US dollar exchange rate is currently hovering close to $1.27 as markets appear to have been anticipating a larger majority.”
The pound also briefly slipped against the euro, with EUR/GBP rising to a high of £0.8858,