httpvh://www.youtube.com/watch?v=iYD60wHH4S8

As it stands at the moment the UK is heading for a hung parliament. Following a larger than expected turnout the polls are too close to call. The Conservative party will be the largest group in the House of Commons whether in a majority or minority government; results over the next 24 hours will clarify things.

The preliminary exit poll from Sky/BBC/ITV showed the Conservatives winning 305 seats, 21 seats short of the margin needed. Labour were in 2^nd with 255 and the Lib Dems imploding with only 61. Sterling lost over a cent against the euro upon release and a similar margin against the US dollar and has stayed volatile throughout the night.

Funnily enough the election will not be the main story on business pages this morning we would wager. As the UK business day was closing all hell broke loose in the US as the Dow Jones lost 998.5 points in the space of 15 minutes. This has been attributed to a trading error involving selling 15 BILLION index futures instead of 15 MILLION and stop losses and algorithmic trading systems panicking. This reignited the fears that we last felt in the days of Lehman Brothers and AIG.

Whether this was a trading error doesn’t really matter as markets were already substantially lower after an unconvincing press conference from ECB governor Jean-Claude Trichet. With the committee deciding to not cut interest rates and to not even discuss the purchase of short-term European government debt shook already anxious investors and they sold risky assets hard.

GBP/USD traded as low as 1.4718 having started the day at close to 1.51, EURJPY lost over 9% and EURUSD made fresh 15 month lows with haven assets such as the US dollar and Japanese yen benefiting massively.

As we have warned since the beginning of the year the potential fall-out from a hung parliament could be shocking. One thing we didn’t think of however was that we would see people unable to vote due to long queues and a lack of ballot papers. Legal challenges and further wrangling over the future of who leads the country will see UK assets get hit hard.

It is of course still the early hours and your correspondent is running on adrenaline and Red Bull. For a full run-down of what has happened overnight and what will happen to GBP tune into our webinar this afternoon at 13.00 BST. It is completely free to all so to register click here https://www2.gotomeeting.com/register/382171818

Have a great weekend