Pound dives as UK plunges into new period of uncertainty

The pound fell sharply after Britain's election saw the Conservatives lose their majority in parliament, raising questions about the next government's ability to lead the talks to leave the European Union.

The British currency lost as much as 3 cents against the dollar by today as the results confirmed exit poll predictions that Prime Minister Theresa May had failed in her gambit to gain a stronger majority for those Brexit talks.

The pound fell as low as USD 1.2636 from USD 1.2955 yesterday, before recovering slightly to trade at USD 1.2737.

Above all, investors are worried about the general uncertainty surrounding the country - whether a bruised May will resign in due course, whether the Conservatives will be able to form a new government or whether it will be an alliance of



opposition parties, led by the Labour Party. 

"The big picture is that political uncertainty could take weeks or months to be resolved and it is likely to weigh on both financial markets (in particular the pound) and the economy," said Paul Hollingsworth, economist at Capital Economics in London.

As the dust settles, one issue will dominate investors' concerns above all: whether Britain is more or less likely to retain privileged access to the EU's single market, the destination for most of the country's exports.

Currently, investors seem to worry that a weakened Conservative prime minister would not have the power to resist calls from some within the party who want a clean divorce from the EU, even if that means losing privileged access to the EU single market.