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Pound remains under pressure amid political uncertainty

Row of new pound coins on one dollar bill Image copyright Getty Images

The pound has resumed its downward slide as investors continue to react to the political uncertainty following last week's shock UK election result.

Sterling had stabilised in early trade, but by late afternoon had dropped 0.66% against the dollar to $1.2659 and fell 0.73% against the euro to 1.1299 euros.

On the stock market, the FTSE 100 index closed down 0.21% at 7511.87.

On Friday, the pound suffered its biggest one-day drop in about eight months following the election.

The uncertainty caused by the election result has led business confidence to sink "through the floor", according to one lobby group.

A snap poll of 700 members of the Institute of Directors found a "dramatic drop" in confidence following the hung parliament.

Global currency markets are trying to work out how the election will affect the UK's exit from the European Union.

Negotiations with Brussels are due to begin next week, with the outcome expected to have a significant impact on the economies of both the UK and the EU.

Mrs May has been pushing for a so-called hard Brexit - where the UK leaves the EU single market and the customs union - instead of a softer Brexit, where the UK would maintain those links.

'Up in the air'

A report from rating agency Moody's released on Monday said the inconclusive election result could affect the UK's credit rating.

Moody's said the election would "complicate and probably delay Brexit negotiations, a credit negative".

However, it added that the government might now "consider 'softer' Brexit options, which could be credit positive".

Kathleen Brooks, research director at City Index, said the future direction of the pound was "still very much up in the air".

"The prospect of a hard split with the EU has been kryptonite for the pound, so a potential rethink on the UK government's Brexit stance could limit [the pound's] downside, at least for now.

"However, not even the rising odds of a soft Brexit have been enough to spark positive momentum for the pound."

Technology shares came under pressure in London on Monday, with software company Micro Focus down by 3.8% and accounting platform provider Sage Group 1.8% lower.

Overall, the European technology sector saw its biggest share declines since the Brexit vote a year ago.

The trend in Europe seemed to be taking its lead from Wall Street. US tech stocks saw a sharp sell-off late on Friday and the downward momentum continued as trading resumed on Monday.

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