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Pound slides as UK wakes up to hung parliament

The pound is extending its overnight losses after confirmation that the UK election ended in a hung parliament.

At publication time, sterling was down around 1.85 per cent for the day, at $1.2710, already on track for its worst day since last October and touching a low of $1.2692 hit around 1.30am BST.

With only eight seats left to declare, the Conservatives are 13 seats short of a majority.

Prime minister Theresa May has said she will try to form a government, likely with the support of Northern Irish unionists, but is facing calls – including from some in her own party – to step down. Mrs May is due to speak outside Downing Street at 10am.

Analysts at banks including JPMorgan and SEB have suggested that a hung parliament could end up being positive for sterling over the longer-term, but in the short-term the uncertainty has knocked investor confidence.

Dean Turner, economist at UBS Wealth Management, said “the short-term outlook points to higher volatility. In the first instance, it is likely that the pound will give up the bulk of its post-election announcement gains”.

Chart via Bloomberg