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9 June 2017

Sterling crashes on Hung Parliament

In a surprising turn of events, the UK’s general election has officially ended with a Hung Parliament.

The least expected outcome of the latest British political vote was given very limited airtime leading up to the vote, with polls largely expecting the Conservative parliamentary majority to be increased.

Subsequently, when 10pm exit polls forecasted that the Tories would lose their parliamentary majority, Sterling fell sharply – falling 1.8% against the dollar to $1.272 and 1.7% against the Euro to €1.133.

This morning, the exit polls have been confirmed. Major UK news outlets have officially called the election result as a Hung Parliament. The Conservative Party have not been able to win the 326 seats required to form a majority government and will pursue the formation of a coalition government. The Labour Party, meanwhile, made significant gains against the Tories, which raises questions as to whether the party’s soft Brexit position should be pursued by the UK when negotiations with the EU begin.

Having campaigned on a hard Brexit mandate spearheaded by Prime Minister Theresa May, the Conservative Party may now have to consider taking a step back from its staunchly anti-EU rhetoric, while Mrs. May’s own position as Prime Minister will be addressed this morning. Will she stay or will she go?

Shortly before the market open in London, the Pound traded just shy of 2017 lows of €1.165 against the Euro, while Cable traded below $1.265 for the first time since April. However, both currency pairings are off their worst levels as investors await the outcome of political manoeuvring by the main parties. Will the recovery continue throughout the morning or could we see a fresh uncertainty-induced sell off?

Either way, Accendo FX can help you save thousands on currency exchange during this unusual period for Sterling. Currently, your FX transactions may be exposed to increased market fluctuations, meaning that any foreign exchange price changes will make a tangible difference to your profits and costs. By calling your personal account manager or logging into our web-based payment platform, you can resolve this issue within minutes. Find how to save thousands in our comprehensive report here.

Similarly, Accendo FX can also help you hedge yourself against further currency fluctuations.

Our team will not only help you to secure forward contracts, which can help alleviate some of the pressures of dealing with FX markets, but will also provide you with timely information regarding political and economic events in the coming weeks which may influence the currency pairings that affect you.

For example, when undertaking a large transaction, by booking a chosen percentage of the transaction cost using a forward and then leaving the rest to either a series of spot trades or even further forward trades, should the price move in your favour, it effectively raises your average price.

Follow these links for more information regarding currency transactions and forward contracts.

Over the page, we analyse the reaction of Sterling’s two major currency pairings. Where to next?

Page: 01

GBP/USD ‘Cable’

Will Cable return to May highs of $1.305 (+2.4%) or pull back towards April lows of $1.236 (-3.0%)?

  • Has fallen to pre-election lows of $1.265, however has found shallow intersecting support
  • Will the bounce continue or will the rally lose momentum?
  • Momentum negative but off worst levels
  • Directional Indicators diverging bearishly

Page: 02

GBP/EUR

Will GBP/EUR return to 2017 highs of €1.205 (+5.7%) or pull back to November lows of €1.105 (-3.1%)?

  • Bounced from support at €1.130 2017 lows. Will the recovery continue or will momentum fizzle out?
  • Stochastics recovered form oversold
  • Momentum negative but close to flat
  • Directional Indicators diverging bearishly

Page: 03

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AccendoFX Ltd - 1 Alie Street, London, E1 8DE (UK) - AccendoFX Ltd. is registered with the Financial Conduct Authority (FCA) No. 671133 and HMRC No. 12798406. Registered in England and Wales No. 9269365.

Page: 04

Our research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. Accendo Markets research has not been prepared in accordance with legal requirements designed to promote its independence and may not comply with FCA guidelines to prevent conflicts of interest and is not subject to any prohibition on dealing ahead of the dissemination of research. As such, this research does not constitute a personal recommendation or offer to enter into a transaction, it is produced and distributed for information purposes only. Accendo Markets considers information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research

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