British Pound Crashes to Seven-week Low as Dollar Gains
The British Pound Sterling on Friday, June 9, crashed to a seven-week low after a shock election result cast doubt on Britain’s talks to leave the European Union.
The pound GBPUSD, -1.6671% bought $1.2718, well off from late Thursday’s level of $1.2957 before the first indication of the election result was released. The GBP dipped to as low as $1.2636 earlier Friday, FactSet data showed, touching levels not seen since April 18, when U.K. British Prime Minister Theresa May said she would form a government backed by a small Northern Irish party after her Conservative Party lost its parliamentary majority in a vote on Thursday just days before the EU departure talks begin.
The benchmark FTSE 100 .FTSE index of large British multinationals fed off sterling’s decline, as earnings from abroad will be worth more from a weaker currency and gained 1 percent. But some sectors seen as particularly sensitive to Brexit instability saw heavy losses, such as homebuilders and real estate investment trusts, which are seen as a barometer of Brexit sentiment due to their holdings of London office space.
After an initial plunge, sterling pared losses against the dollar GBP= and euro EURGBP=, while the dollar gained. Safe-haven gold XAU= and prices of U.S. Treasuries drifted lower.