Yesterday was the all-important election day in the UK, were British Citizens took to the polling stations to elect the party which would guide the UK through the next 5 years, including taking the helm for the key Brexit negotiations with the EU, which will affect the UK and EU markets for many a year going forward. Prior to the elections, polls showed the conservatives were to take the lead with a majority, which would put any jitters regarding political strain to rest and allow the GBP and equites to trade with relative less risk.

However, as counting began, exit polls were quick to show that the conservatives would miss the majority seat required to be able to run parliament alone, which resulted in an aggressive sell-off of the GBP as a hung parliament, in which no clear majority was found, threatened stability. The GBP dropped over 2% within minutes, before stabilizing as exit polls showed that the conservatives majority might by back on, however, with the morning sun, it dawned on markets that a hung parliament it is, seeing a further depreciation of the GBP as the Conservatives managed only a slight lead against the Labor party.

This implies that a coalition will be necessary and the longer it takes to form the longer the GBP will remain under pressure, however, if the parties are decisive, giving markets confidence that politically, all is well, we would see the GBP head north as market price in the improved sentiment and optimism over a more balanced Brexit stance is struck by parliament.

From an economic perspective, we have the release of the Manufacturing Production figure out of the UK, which will also play a role in the direction of the GBP. A better than expected release will see the GBP strengthen, while a worse than expected release will see the GBP weaken.