Pound still struggles as British election sows uncertainty

14 June, 2017 12:00 AM printer

HONG KONG: The pound wallowed near two-month lows Tuesday (Jun 13), unable to make a strong recovery from last week's shock election that saw Britain's ruling Conservatives lose their majority, throwing the country into uncertainty days before key Brexit talks.

While Prime Minister Theresa May looked to counter anger within her party by apologising and telling MPs "I got us into this mess, and I'm going to get us out", there are doubts about her future in Downing Street, reports The Channel NewsAsia.

May had called the vote in a bid to strengthen her majority, and her bargaining power, before going into the EU exit talks set to start on Jun 19. Now she must rely on the support of Northern Ireland's Democratic Unionist Party.

Greg McKenna, chief market strategist at AxiTrader, said: "The political uncertainty is unhelpful given Brexit talks are about to begin in the next week."

He added that "sterling came under renewed pressure as a result" of the newly formed government's refusal to soften its approach to the discussions. "Why the government wouldn't use the election for a reset I just don't know."

In Asian trade the pound bought $1.2690, up from New York trade but well off levels around $1.29 seen before the election.

The currency's "near-term direction will continue to be driven by the post-election fallout, but the prospects look increasingly gloomy as the possibility of another Tory leadership vacuum enters the picture at precisely the wrong time for the UK," said Stephen Innes, senior trader at OANDA.

On equity markets, technology firms were unable to bounce back from the previous day's sell-off that was sparked by a rout in the sector on Wall Street Friday.

Sony and Sharp were both down in Tokyo while Samsung was flat in Seoul after Monday's tumble. However, Tencent and Lenovo were in positive territory in Hong Kong.

The Nasdaq suffered another slump Monday as Apple and Amazon took a beating, with analysts wondering whether the selling is down to profit-taking or the start of a broad retreat after all US indices hit records last week.