The pound has fallen sharply after the official election exit poll, which cast doubt over whether the Conservatives will win an overall majority.
Traders had been expecting a lead for Theresa May’s party with an overall majority in the House of Commons.
The pound fell by more than two cents to $1.2717 against the dollar, immediately after the poll was released.
It has since recovered some ground and is at $1.2742.
Sterling has been trading in a range between $1.28 and $1.30 in recent weeks.
The exit poll indicated that the Conservatives will be the largest party but will lose 17 seats with a projection of 314 seats.
“The market will be praying that this exit poll has got it wrong,” said Lee Hardman, currency analyst at MUFG.
Investors have been buying up the pound over the last few days, he said.
“There is plenty of scope for a sharp downside move if the exit poll proves true.”
Neil Wilson, senior market analyst at ETX Capital said the exit poll was a shock for the financial markets. “It’s fair to say the City was pretty confident of a Conservative majority.”
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