FX.co ★ GBP tumbles amid political turmoil in UK

In the UK, the hung parliament where no political party has an absolute majority sent the pound sterling into a downward spiral. The UK general election ended with the worse-case outcome for both the political environment in the kingdom and global investors. In response, the British currency shed nearly 2% in a flash to the level last seen on April 18. To be more exact, the pound plummeted in just 4 minutes since preliminary votes were announced.

According to exit polls, the ruling Conservative party failed to secure a majority in the parliament. From now on, investors find it difficult to forecast developments of the Brexit negotiations which are due to start on June 19. Meanwhile, UK Prime Minister Theresa May is forming a new government for the Conservatives. In mid-April, Theresa May called for a snap general election with a view to reinforcing her power. However, her gamble brought about the opposite effect. Now the UK is facing the political turmoil. In essence, any parliament aims to stand up for interest of voters. In this particular case, if decisions of UK Premier Theresa May could make a negative impact on Britons, the Parliament retains the right to reject her resolutions. So new lawmakers will require Theresa May to exercise diplomatic flexibility in the Brexit talks which will lead to a less-abrupt break with the European Union. So Theresa May’s ability to compromise will determine a further dynamic of the pound sterling.