Pound dives on fears United Kingdom election may produce no clear victor

Sterling's value had dropped overnight, and as trading began in London it slipped further, standing 2.3% lower at just below $1.27, with markets anxious about heightened political uncertainty.

The pound traded 0.2 percent weaker at $1.2861 as of 5:58 a.m.in Sydney.

The UK's blue chip share index jumped 1.3 per cent to 7,544.78 minutes after opening.

A fall in the value of the pound tends to boost the FTSE as the majority of companies in the index have significant operations overseas. Their business is more domestically-focused which is why they have less to gain from a weak pound.

He added: "A hung parliament is the corridor of uncertainty that markets don't really like".

MUFG currency strategist Lee Hardman said: "The market wants more clarity now in terms of who is going to be Prime Minister, what form the government is going to take and ultimately how all that feeds through into upcoming Brexit negotiations".

The BBC is projecting that the Conservatives will be the largest party with 318 seats - eight short of a majority.

Against the euro those were the highest rates since the aftermath of last year's Brexit referendum vote to leave the European Union, pointing to nerves that an upset could deny May an outright victory.

Some analysts say that might reflect the diminishing prospect of a "hard" Brexit.

George Osborne, the former chancellor, said he expected a Tory government to be the most likely outcome from the highly unpredictable election, not least because Mrs May could count on the support of about 10 Northern Ireland Unionists.

"Mrs May's mandate to push through her clean, hard Brexit has evaporated".

In spite of Labour gains, the mathematics at 2am did not appear to point to Jeremy Corbyn ending up as prime minister, even if he were able to cobble together a "progressive coalition" of SNP, Liberal Democrats, Greens and Welsh nationalists.

A hung parliament means that the government's direction of travel is less clear.

Given the precarious outcome of the United Kingdom general election, investors could well need a drink today, so it is probably apt that brewer-cum-pub landlord, Fuller, Smith and Turner PLC (LON:FSTA) is the only firm scheduled to deliver results.

The shock outcome saw the pound shed as much as three US cents at one point, or close to 2 percent, on fears the political turmoil could delay, and complicate, Brexit talks, which are due to start in 10 days.

The pound fell sharply after an exit poll in Britain's election forecast that the Conservatives would fall short of a majority in parliament, raising the prospect that the country might not have a clear victor or strong government as it starts its negotiations to leave the European Union.

Sterling slipped against the dollar on Thursday while market bets on how volatile the currency will be over the next 24 hours touched their highest in a year, as Britain voted in a national election that some polls have suggested is too close to call.

If the final result shows no clear victor, that could put further pressure on the pound, says Samuel Tombs, analyst at Pantheon Macroeconomics.

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