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Will a Hung Parliament Lead to a Softer Brexit ?

The outcome of the UK general election turned out to be that the Tories won 318 seats, the Labour 262, the SNP 35, the Lib Dems 12 and the DUP 10. None of the parties won more than 326 seats, indicating a Hung Parliament.

The Tories lost their majority, now having even less seats than they had before the election. Conversely, the Labour Party saw an increase of around 30 seats, the Labour’s dominance in the House of Commons is now expanding. The UK’s political climate has been changed from now on.

The Tories are currently seeking a coalition with the DUP (Democratic Unionist Party). The DUP is the biggest party in North Ireland, which won 10 seats after the election. Nevertheless, the coalition is likely to be loose as there are plenty of differences between the two parties’ political stances.

Regardless of whether the Tories can successfully form a coalition with the DUP, Theresa May will face continuous pressure of stepping down over the following months, especially from her party, as her gamble resulted in the Tories lost a majority. The uncertainties associated with a Hung Parliament and a prospective change of the Prime Minister, weighing on the UK’s political prospects.

The Brexit negotiations are due to start on June 19th. Compared to Theresa May’s former statement, “no deal is better than a bad deal”, the Labour leader Corbyn has pledge that a Brexit deal will be done, he also strives to make the UK staying in the single market and custom union. As a Hung Parliament might weaken the UK’s position during the Brexit negotiation process, and the Labour’s dominance has been increased, it implies the Brexit process will likely to be softer.

GBP/USD has been consolidating in a range between 1.2700 – 1.2800, after hitting a 7-and-a-half week low of 1.2634 on Friday. EUR/GBP hit a high of 0.8858 on Friday, last seen on November 9th, then it saw a subsequent consolidation in a range between 0.8770 – 0.8820. GBP/JPY hit a low of 139.50, last seen on April 21, then it saw a consolidation, holding above the psychological support line at 140.00.

The UK inflation report hearing will be released at 11:00 BST this morning. The UK inflation data (CPI and PPI) for May will be released at 09:30 BST on Tuesday. it will likely affect GBP crosses.



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