Pound falls after London terror attacks raise political tensions

The British currency has been buffeted over the last two weeks as polls have depicted a tightening election race. — AFP picThe British currency has been buffeted over the last two weeks as polls have depicted a tightening election race. — AFP picLONDON, June 5 — The British pound fell after a weekend terror attack in London killed seven people, raising investor jitters days before the nation goes into a snap election.

The pound declined as much as 0.3 per cent in early trading in Asia today, though losses were contained even as the latest terror incident at a popular nightlife spot, which also left 21 people injured, gripped UK politics amid a tightening election race.

The third attack in the UK in less than three months comes before the June 8 election, which will be held as armed police patrol the streets in the greatest show of force for decades.

The pound has been buffeted over the last two weeks as polls have depicted a tightening race, raising the possibility that Prime Minister Theresa May might not be able to get the increased majority she had hoped. For analysts, the worst option is that the election will yield a hung parliament, with either the Conservative Party or the opposition Labour Party being unable to secure an outright victory. That would create huge uncertainty just 11 days before Brexit negotiations are set to begin.

“In the markets there is a very simple rule of thumb: the larger the Conservative majority becomes, the more positive that is for sterling,” Adam Cole, head of global foreign exchange strategy at head of global foreign-exchange strategy at Royal Bank of Canada, said in an interview with Bloomberg Television before the weekend’s terror attack.

“The worst-case scenario is the UK going into the Brexit negotiations with a hung parliament and no overall majority for any party.”

The pound traded 0.2 per cent weaker at US$1.2861 as of 5.58am in Sydney. It fell 0.5 per cent last month after having rallied about 4.5 percent in the two months earlier. — Bloomberg

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