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Election 2017: Pound and shares set for volatile trading Election 2017: Pound makes further losses in choppy trading
(35 minutes later)
Traders are expecting a volatile day for the pound and UK shares after the election resulted in a hung parliament. The pound has fallen sharply against other currencies after the UK election resulted in a hung parliament.
Overnight the pound fell sharply, at one stage hitting $1.27 against the dollar, before recovering slightly. The value of sterling had dropped overnight, and as European traders set to work it slipped further, standing 2% lower at just below $1.27.
Traders had been expecting a clear victory for Theresa May's Conservatives, but are now concerned about political uncertainty. Sterling is down 1.8% against the euro at 1.1344.
Traders had been expecting a clear victory for Theresa May's Conservative Party, but are now concerned about political uncertainty.
The London stock market begins trading at 08:00 GMT.The London stock market begins trading at 08:00 GMT.
A weaker pound has supported the UK stock market over the last few months, particularly shares in companies which have a lot of business overseas.A weaker pound has supported the UK stock market over the last few months, particularly shares in companies which have a lot of business overseas.
Hung Parliament: What happens next?Hung Parliament: What happens next?
Election results live updatesElection results live updates
Election 2017: At a glanceElection 2017: At a glance
But analysts are concerned about the heightened political uncertainty.But analysts are concerned about the heightened political uncertainty.
"The unexpected outcome increases the threat of further volatility for sterling and UK assets," said Mark Haefele, global chief investment officer at UBS Wealth Management."The unexpected outcome increases the threat of further volatility for sterling and UK assets," said Mark Haefele, global chief investment officer at UBS Wealth Management.
"The result is likely to call the position of the Prime Minister into question, the government is likely to be relatively weak, and the result further complicates the upcoming Brexit negotiations," he said."The result is likely to call the position of the Prime Minister into question, the government is likely to be relatively weak, and the result further complicates the upcoming Brexit negotiations," he said.
The BBC is projecting that the Conservatives will be the largest party with 318 seats - eight short of a majority.The BBC is projecting that the Conservatives will be the largest party with 318 seats - eight short of a majority.
While the pound's move is significant, it is far from dramatic.While the pound's move is significant, it is far from dramatic.
Some analysts say that might reflect the diminishing prospect of a "hard" Brexit.Some analysts say that might reflect the diminishing prospect of a "hard" Brexit.
Although a hung parliament would mean uncertainty, Neil Wilson at ETX Capital said that a "softer version of Brexit" was now more likely.Although a hung parliament would mean uncertainty, Neil Wilson at ETX Capital said that a "softer version of Brexit" was now more likely.
"Mrs May's mandate to push through her clean, hard Brexit has evaporated. Voters didn't want to hand her the blank cheque for Brexit. It may leave negotiations in limbo but would also tend to suggest that the downside for sterling is limited," he said."Mrs May's mandate to push through her clean, hard Brexit has evaporated. Voters didn't want to hand her the blank cheque for Brexit. It may leave negotiations in limbo but would also tend to suggest that the downside for sterling is limited," he said.
Former Business Secretary Sir Vince Cable said "the whole Brexit approach will have to be rethought".Former Business Secretary Sir Vince Cable said "the whole Brexit approach will have to be rethought".
Sir Vince is returning to the Commons after regaining the seat of Twickenham in southwest London for the Liberal Democrats.Sir Vince is returning to the Commons after regaining the seat of Twickenham in southwest London for the Liberal Democrats.
Election analysis from Kamal Ahmed, BBC Economics EditorElection analysis from Kamal Ahmed, BBC Economics Editor
A hung parliament means that the government's direction of travel is less clear.A hung parliament means that the government's direction of travel is less clear.
Deals with different parties may need to be done - each with very different outcomes.Deals with different parties may need to be done - each with very different outcomes.
Nervousness in the markets is likely to increase and investors in charge of large amounts of global capital could decide to move their money to more attractive markets, such as the eurozone where growth has picked up and political risk (the major Dutch and French elections are behind us for example) has reduced.Nervousness in the markets is likely to increase and investors in charge of large amounts of global capital could decide to move their money to more attractive markets, such as the eurozone where growth has picked up and political risk (the major Dutch and French elections are behind us for example) has reduced.
More from KamalMore from Kamal
Sterling fell after an exit poll for the BBC, ITV and Sky released as the polls closed at 22:00 cast doubt on an overall Conservative majority, raising concerns about increased uncertainty and a possible delay to Brexit negotiations.Sterling fell after an exit poll for the BBC, ITV and Sky released as the polls closed at 22:00 cast doubt on an overall Conservative majority, raising concerns about increased uncertainty and a possible delay to Brexit negotiations.
Sterling has been trading in a range between $1.28 and $1.30 in recent weeks.Sterling has been trading in a range between $1.28 and $1.30 in recent weeks.
Against the euro the pound is down 1% at 1.142 euros.
Analysts are concerned that political uncertainty could damage the economy.Analysts are concerned that political uncertainty could damage the economy.
"The inconclusive election result will be an unhelpful influence at a time when quarter-on-quarter GDP growth already has dropped this year to 0.2%, the slowest rate in the G7," said Samuel Tombs, chief UK economist, at Pantheon Macroeconomics."The inconclusive election result will be an unhelpful influence at a time when quarter-on-quarter GDP growth already has dropped this year to 0.2%, the slowest rate in the G7," said Samuel Tombs, chief UK economist, at Pantheon Macroeconomics.