GBP stabilises in wake of UK general election as Conservatives attempt to form minority government
The GBP stabilised as markets opened earlier today after suffering its biggest single day drop in eight months following the shock election result last week. The GBP was at $1.2739 against the USD and was down 0.1% against the EUR at €1.1367.
The unexpected result of a hung parliament has caused political turmoil in the UK as prime minister Theresa May, who is under increasing pressure to resign, scrambled to reach a deal with Northern Ireland’s largest party, the DUP. The DUP won 10 seats, which coupled with the Conservatives 318 seats would just about bring the over the magic number of 326 seats in parliament.
Global currency markets are now waiting to see how the result will affect the UK's exit from the EU. Negotiations are expected to begin next week.
Mrs. May called the snap-election, which was not necessary for another 3 years, with the aim of increasing her majority in parliament to strengthen her hand in the upcoming negotiations. Instead, she has now lost her majority and there is no doubt that her position has weakened considerably as a result.
Even if the Conservatives are successful in forming an alliance with the DUP, most of the opposition parties imply that Mrs May’s position will become untenable in time and there is already speculation that several Conservative MPs are plotting a leadership bid against her with Foreign Secretary Boris Johnson the favourite despite his recent statement of support for Mrs. May.