Sterling stunned by UK election shock, fallout limited elsewhere

Today, Sterling spiraled lower as British elections left no single party with a clear claim to power, sideswiping investors who had already weathered major risks in the United States and Europe. With the majority of seats counted in the quick vote, British Prime Minister Theresa May had no way to win an outright majority in parliament.

The Pound shed 2% on fears the political turmoil could delay and confound talks on leaving the European Union, which are due to start in less than two weeks. Yields on 10-year Gilts fell 3 basis points to 1%, but FTSE Futures recovered early losses and turned 0.2% higher. The damage was limited elsewhere, with E-mini Futures for the S&P 500 edging up 0.1%. The Nikkei added 0.5% and MSCI’s broadest index of Asia-Pacific Shares outside Japan were all but flat. By 6:00 GMT Sterling had skidded to $1.2697, having carved out a two-month trough of $1.2689. It was also down 1.8% on the Euro at 88.18 pence.

There was less drama elsewhere, as the Japanese Yen gave up early gains and eased to 110.20 per Dollar. The Euro was little moved against the US Dollar at $1.1209.

The single currency had slipped overnight when the European Central Bank cut forecasts for inflation and said it had not discussed scaling back its massive Bond-buying campaign, sending Bond Yields to multi-month lows. Overnight, Wall Street had seemingly judged the testimony of former FBI director James Comey was not life threatening to the administration of President Donald Trump.

The Dow rose 0.04% while the S&P 500 gained 0.03% and the Nasdaq Composite 0.39%. In commodity markets, Spot Gold was 0.3% lower at $1,274.45 an ounce.

Oil prices remained subdued with Brent having settled at its lowest since Nov. 29, the eve of an OPEC production cut deal. US Crude Futures edged down 2 cents to $45.62 a barrel, with Brent Crude at $47.86.