Traders are expecting a volatile day for the pound and UK shares after the election resulted in a hung parliament.
Overnight the pound fell sharply, at one stage hitting $1.27 against the dollar, before recovering slightly.
Traders had been expecting a clear victory for Theresa May’s Conservatives, but are now concerned about political uncertainty.
The London stock market begins trading at 08:00 GMT.
A weaker pound has supported the UK stock market over the last few months, particularly shares in companies which have a lot of business overseas.
But analysts are concerned about the heightened political uncertainty.
“The unexpected outcome increases the threat of further volatility for sterling and UK assets,” said Mark Haefele, global chief investment officer at UBS Wealth Management.
“The result is likely to call the position of the Prime Minister into question, the government is likely to be relatively weak, and the result further complicates the upcoming Brexit negotiations,” he said.
The BBC is projecting that the Conservatives will be the largest party with 318 seats – eight short of a majority.
While the pound’s move is significant, it is far from dramatic.
Some analysts say that might reflect the diminishing prospect of a “hard” Brexit.
Although a hung parliament would mean uncertainty, Neil Wilson at ETX Capital said that a “softer version of Brexit” was now more likely.
“Mrs May’s mandate to push through her clean, hard Brexit has evaporated.
Voters didn’t want to hand her the blank cheque for Brexit. It may leave negotiations in limbo but would also tend to suggest that the downside for sterling is limited,” he said.
Former Business Secretary Sir Vince Cable said “the whole Brexit approach will have to be rethought”.
Sir Vince is returning to the Commons after regaining the seat of Twickenham in southwest London for the Liberal Democrats.
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