When Theresa May announced on 18 April that she planned to call a “snap” general election, it surprised almost everyone. It had been only two years since the last UK-wide poll, won by Mrs. May's predecessor, David Cameron. And under the relatively recent Fixed-Term Parliaments Act, another general election had not been due until 2020.
Although, earlier in the September last year, she hinted that there was no need for elections. Yet during the 6 months the opinion regarding her situation changed dramatically. On April 18th, at the steps of Downing Street she announced general elections which surprised almost everyone inside and outside of UK.
Her stated reason for calling snap election was her need to gain a majority hand in the Brexit negotiations and to take all the stakeholders on board to ensure that everyone is on same page.
Traders had been expecting a clear victory for Theresa May's Conservatives, but are now concerned about political uncertainty. When the general election exit poll was revealed at 10pm, the pound immediately dropped by 2% as investors took a position that a hung parliament was a possible outcome of the general election.
Because a hung parliament means that the government's direction of travel would be less certain. Deals would have to be done, and those vital Brexit negotiations possibly become all the more difficult. The future of the UK economy could be confused by a fog of political to-ing and fro-ing.
Traders are expecting a volatile day for the pound and UK shares after the election resulted in a hung parliament.
Overnight the pound fell sharply, at one stage hitting $1.27 against the dollar, before recovering slightly.