Sterling dropped sharply as a surprise exit poll projected that the Conservative party would fall short of an overall majority in the UK election. The UK currency dropped in the immediate wake of the poll by 2 per cent against the US dollar and the euro and was trading around 1 per cent per cent lower by midnight.
The drop in the currency reflects uncertainty about the shape of the next government and what it will mean for the Brexit talks, which had been due to get underway shortly. Traders will now be monitoring the constituency declarations to see if the polls prove correct, with some recovery in sterling’s value after the early results were declared.
The drop in the value of sterling, which brought the euro to as high as 88p, will – if sustained – come as a concern to Irish exporters to the UK. The trend in the days ahead will depend on the final outcome of the vote and the formation of the new government, along with indications of what it will mean for the Brexit talks.
As well as currency markets, the Irish government will also be closely watching the reaction of stockmarkets on Friday, particularly given the plans to dispose of part of its shareholding in AIB in the next couple of weeks. The impact on the wider Brexit talks will also be monitored from Dublin.
Sterling was trading at around $1.28 at midnight, two hours after the poll, edging up slightly higher after early results from Newcastle and Sunderland. It earlier touched $1.2709, the weakest level since April.Against the euro, sterling was around 87.5p, having broken through 88p earlier,
A Bloomberg survey of 11 banks and brokerages conducted before the exit poll showed that sterling could plunge to as low as $1.20 in the event of a hung parliament, though that was below the median forecast for a level of $1.2350. A slender majority for the Conservatives would push the pound up to $1.3025, according to the survey.