Sterling down sharply after exit poll predicts Tories to fall short

UK currency drops in immediate wake of prediction by 2% against euro and US dollar

Sterling has fallen 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 1.5 per cent lower an hour later.

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 under way shortly.

Traders will now be monitoring the constituency declarations to see whether the polls prove correct, with some small recovery in sterling’s value after the early results were declared.


Irish exporters

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 stock markets 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 $1.2750 just after 11pm on Thursday and edged up slightly higher after results from Newcastle and Sunderland. It earlier touched $1.2709, the weakest level since April.

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.

Cliff Taylor

Cliff Taylor

Cliff Taylor is an Irish Times writer and Managing Editor