Pound to Dollar Exchange Rate News: British Currency Plummets to New Lows After Shocking Election Outcome
Following the shocking results of the 2017 general election in the United Kingdom, the pound suffered a heavy blow that pushed it down to its steepest fall this year. The recent election has left the United Kingdom with a hung parliament that has no clear overall majority.
The outcome prompted the British currency to fall to its lowest level against the euro in almost 21 weeks. The Telegraph reported that the pound went down by as a much as 2.34 percent against the U.S. dollar, resulting in an eight-week low of $1.2690. The sterling also suffered a seven-month low of €1.1287 against the euro.
The local currency, however, was able to bounce back and recover some of its losses in the afternoon, after Prime Minister Theresa May announced her plan to form a coalition government with the help of the Conservatives and Northern Ireland's Democratic Unionist Party (DUP).
Experts believe the pound will continue to become unstable in the coming days as the government addresses crucial issues regarding its Brexit strategy. Moreover, the pound will continue to fall if May fails to form a new government.
After the election, the Conservative Party had 318 seats, Labour with 262, Scottish National Party with 35 and the Liberal Democrats with 12. To qualify as the overall majority, having 326 seats is required.
The loss of the Conservative majority has raised doubts about the government's ability to pursue its original Brexit strategy, such as its mandate to depart from the single market system and customs union. A handful of May's ministers lost their seats on election night, including Ben Gummer who crafted the Tory manifesto on Brexit. Given the current government structure, there's doubt as to whether Brexit will fully materialize.
"With Brexit talks due to start in a few days' time there is now some doubt about the Prime Minister's future, but also the strength of the UK's negotiating position with respect to the Brexit talks," CMC Markets UK chief market analyst Michael Hewson said.
Meanwhile, May is expected to finalize her team of ministers within the week despite facing criticism over her deal with the DUP.
