This is no re-run of the EU referendum night. This time, after a decent drop, sterling has dragged itself off the ropes.
In the moments after exit polls indicated a hung parliament, the currency market cast its vote. The pound slumped nearly 2 per cent towards $1.27 to the dollar and to £0.8829 against the euro.
In fast-moving market conditions, recent market patterns matter. We have popped below the 50-day moving average at $1.2807, last broken in early April.
This leaves the market looking at the 100-day moving average of $1.2620 and 200-day MA at $1.2579 as the next tough levels to break on the downside. The pound rose above both measures in April, when traders expected a sizeable increase in the Conservative’s majority.
The early swoon in the pound is proving a little flaky, with the currency already creeping back up to $1.28, making this a more modest 1.2 per cent decline on the day.
UBS Wealth Management’s Dean Turner writes:
Should the exit poll prove accurate, it is likely that the pound will give up the bulk of its post-election announcement gains. After this, retreating back to the low $1.20 levels versus the dollar is a very real possibility. Nevertheless, sterling has steadied following the initial sell-off and there are few signs that anxiety has spread into other markets just yet.
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