Friday 9th June 2017
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The New Zealand dollar lurched higher against the British pound after initial exit polls suggested a hung parliament in the UK, potentially delaying Britain's departure from the European Union and stalling initiatives such as a new trade deal for Kiwi exporters.
The kiwi jumped as high as 56.69 British pence, and was trading at 56.42 pence as at 10am from 55.74 pence as at 8am and ahead of the poll. The pound fell about 1.6 percent against the greenback to US$1.2704.
BBC News reported a survey taken at polling stations across the UK suggested sitting Prime Minister Theresa May's Conservatives could get 314 seats, short of an absolute majority, while the opposition Labour would get 266. The result, if confirmed, would mean May would have to form a coalition or attempt to govern with the backing of other smaller parties.
The pound took an immediate tumble because “a hung parliament will just make May's position harder,” said Stuart Ive, OMF private client adviser. "It would just make it a lot more difficult to progress anything through parliament."
Critically, May might run into obstacles regarding her plans for Britain's departure from the European Union. "Not only will every move of Brexit have to go through every member of the EU, it will also have to go through every member of the UK parliament," said Ive.
While the kiwi gained against the pound, it fell against the US dollar and was trading at 71.93 US cents versus 72.15 cents as at 8am in a global risk-off move due to the heightened uncertainty. For New Zealand, any delays in Brexit and a hung parliament in the UK could create difficulties for New Zealand when it comes to negotiating a bilateral trade deal.
"It just leads to more uncertainty about how Brexit is going to work. As exporters into that market, there would be some challenges," said Phil Borkin, an economist at ANZ Bank New Zealand.
OMF's Ive also said it creates more difficulties but noted that the exit polls are just an early indicator. He said the picture would become clearer around 1pm local time as official results roll in.
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