Sterling struggles as British election spreads uncertainty
British Pound shattered near two-month lows, unable to recover from last week’s shocking election that saw Britain’s ruling Conservatives lose their majority, throwing the country into uncertainty days before key Brexit talks.
While Prime Minister Theresa May looked to counter anger within her party by apologising and telling MPs that I got us into this mess, and I’m going to get us out. May had called the vote in a bid to strengthen her majority, and her bargaining power, before going into the EU exit talks set to start on June 19. Now she must rely on the support of Northern Ireland’s Democratic Unionist Party.
Greg McKenna, chief market strategist at AxiTrader, said that political uncertainty is unhelpful given Brexit talks are about to begin in the next week. Sterling came under renewed pressure as a result” of the newly formed government’s refusal to soften its approach to the discussions. Why the government wouldn’t use the election for a reset I just don’t know.
In Asian trade the pound bought $1.2690, up from New York trade but well off levels around $1.29 seen before the election.
The currency’s “near-term direction will continue to be driven by the post-election fallout, but the prospects look increasingly gloomy as the possibility of another Tory leadership vacuum enters the picture at precisely the wrong time for the UK,” said Stephen Innes, senior trader at OANDA.
On equity markets, technology firms were unable to bounce back from the previous day’s sell-off that was sparked by a rout in the sector on Wall Street Friday. NASDAQ suffered another slump Monday as Apple and Amazon took a beating, with analysts wondering whether the selling is down to profit-taking or the start of a broad retreat after all US indices hit records last week.
Broader Asian markets fared slightly better after Monday’s steep losses. Tokyo finished marginally lower but Shanghai closed up 0.4 percent and Hong Kong gained 0.6 percent. Sydney gained 1.7 percent and Seoul jumped 0.7 percent, while Wellington and Taipei were also up.
Traders are now awaiting the end of the Federal Reserve’s latest policy meeting. While another interest rate rise is widely expected, the bank’s post-meeting statement will be scanned for some forward guidance and clues about future movements.
Attention has focused on Sessions as reports swirl that he may have had more meetings with Russian officials during the campaign last year than the two he has informed authorities of. In early European trade London, Frankfurt and Paris each rose 0.3 percent.