Pound dives as Britain thrown into chaos by shock vote

Hong Kong: The pound plunged almost two percent Friday as Prime Minister Theresa May looked set to lose her majority in Britain’s general election, fuelling political uncertainty just days before the start of Brexit talks.

May had called the snap vote in a bid to boost her party’s hold over Westminster and give her a stronger hand in talks with EU leaders over the country’s detachment from the bloc.

However, the leftist Jeremy Corbyn’s Labour Party slashed the ruling Conservatives’ lead, leaving the country heading for a hung parliament and possibile political instability.

The pound dived from $1.2959 to $1.2695 minutes after exit polls indicated the Conservatives were going to lose their majority.

“The initial exit poll suggests it’s been a catastrophic campaign for Theresa May,” Craig Erlam, London-based senior market analyst at OANDA, said.

“A hung parliament is the worst outcome from a markets perspective as it creates another layer of uncertainty ahead of the Brexit negotiations and chips away at what is already a short timeline to secure a deal for Britain.”

The likely outcome will throw Britain once again into upheaval less than a year after the country’s decision to leave the EU, which led the pound to collapse about 15 percent against the dollar between June and October 2016.

– Stocks mostly up –

However, Minori Uchida, head of global market research at Bank of Tokyo-Mitsubishi UFJ, told AFP: “May’s setback could lead to a soft Brexit, which is not so bad for the British economy in the long run.”

While the pound has come under fresh pressure Asian stock markets were mostly higher as traders took the prospect of chaos in Britain in their stride.

Testimony from sacked FBI boss James Comey that Donald Trump asked him to drop a probe into former national security advisor Mike Flynn was had little effect.

“James Comey’s testimony was pretty forthright and genuinely questioned the president’s conduct,” said Greg McKenna, chief market strategist at AxiTrader.

“But it didn’t appear to have any fresh revelations which could increase the chances of the impeachment of President Trump.”

But he added that it was likely to stall the president’s agenda to boost growth with tax cuts, big infrastructure spending and deregulation.

Tokyo rose 0.9 percent by the break, Shanghai added 0.3 percent and Singapore gained 0.3 percent and Seoul was up 0.7 percent.

However, Hong Kong dipped 0.3 percent a day after ending above 26,000 for the first time in almost two years.

– Key figures around 0230 GMT –

Pound/dollar: DOWN at $1.2695 from $1.2959

Tokyo – Nikkei 225: UP 0.9 percent at 20,089.90 (break)

Hong Kong – Hang Seng: DOWN 0.3 percent at 25,993.00

Shanghai – Composite: UP 0.3 percent at 3,159.02

Euro/dollar: DOWN at $1.1189 from $1.1211

Dollar/yen: UP at 110.15 yen from 109.81 yen

Oil – West Texas Intermediate: DOWN three cents at $45.61 per barrel

Oil – Brent North Sea: DOWN one cent at $47.85 per barrel

New York – Dow: UP less than 0.1 percent at 21,182.53 (close)

London – FTSE 100: DOWN 0.4 percent at 7,449.98 (close)

Agence France-Presse