Compared to June 24 last year, this is a flesh wound.
Sterling still stands 1.7 per cent lower on the day after the shock inconclusive result of the UK general election. But the initial drop has not meaningfully extended since the 10pm exit polls last night.
The currency is being pulled in two ways. Prolonged uncertainty is a drag, but the surprisingly strong outcome for Labour, and the relatively constructive Brexit stance from its leader Jeremy Corbyn point to a softer Brexit.
At pixel time, the pound is at $1.2732.
Nomura’s Jordan Rochester writes:
The market hasn’t fallen as much as surveys expected it would for good reason: The market may simply say that we were trading at $1.25 before this election and that is where we belong, but it is not so simple, because a) a smaller majority could lead to a more open dialogue as to the direction and task at hand of Brexit or b) Theresa May could step down and be replaced by a less hard-Brexit figure. Nonetheless, in either scenario, sterling volatility is the winner, as the direction over coming weeks is still very uncertain.