How does a UK hung parliament impact GBPUSD?


The markets are still digesting the UK snap election outcome, which resulted in a hung parliament. How does a UK hung parliament impact GBPUSD on the long-term? Gain more insights from ITRADER.com’s GBPUSD analysis post the 2017 UK election. 

13 June, ITRADER.com – In case you wonder how the British pound fared last week in the wake of the UK Snap election in United Kingdom, ITRADER, a reliable and regulated broker, has tracked the before and after performance of Sterling to help investors assess their investment in the currency market.

When votes were being tallied, sterling has already felt the pressure, losing more than 2.5% of its strength against its major rivals. But as the outcome of the elections surfaced, resulting to a hung parliament, the pound dived deeper. Now the question is, how does a UK hung parliament impact GBPUSD on the long-term? Let’s first look into the short-term reaction of cable after the election.

GBPUSD analysis post 2017 UK election results

On a volatile trading last Friday, June 9, just a day after the votes, the pound sterling tumbled more than 2%, which sent the currency into multi-month low, to settle at 1.2742 versus the US dollar. It was a sharp decline from Thursday close of 1.2977, the exact day of general elections.

GBPUSD GBPUSD H1 chart

The market does not see any positive light on the outcome of the UK elections. Investors are still digesting this result, which is an automatic risk for the pound. On Monday, June 12, the pound registered a post-election loss of 0.5% versus the dollar, and closed at 1.26599 its lowest settlement in more than seven weeks. Clearly, investors were still worried about the political uncertainty surrounding the British market.

How does a UK hung parliament impact GBPUSD? 

Analysts worried that a hung parliament can be a nightmare for the pound. Sterling has been affected by uncertainties coming from the formal processing of Brexit and as no party won a majority, it might create further downside risks for the currency. Economists are expecting that the British pound might shove down to 1.23-level versus the greenback.

UK hung parliament impact GBPUSD

Sterling has been down more than 2% against the US dollar since the general elections and had experienced it biggest daily decline since October. The one-month sterling-dollar risk reversal, a gauge on the balance of bets on the pound, slid to its lowest mark since September.

Political uncertainties are no strange to bringing negative impacts to the financial markets. As the United Kingdom head to a more difficult situation to formally withdraw from the European Union, it looks like the British pound will continue a general trend of weakening against its peers.

ITRADER.com risk disclaimer

The GBPUSD analysis post 2017 UK election was provided by ITRADER.com. It should not be construed as advice nor as a recommendation to invest or execute transactions of any kind. Trading in financial instruments may result in losses as well as profits. Past performance does not guarantee future results. Trading in derivatives (e.g. options, futures, and swap contracts) could result to the loss of the whole capital invested. Forex, CFDs and Derivatives are leveraged products and involve a high level of risk.

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