How pound and markets reacted to Britain's hung parliament

It took the blink of an eye for the City to react to the first exit poll.

On Thursday night, at 10pm, a hung parliament was predicted and the value of the pound fell by nearly 2%.

Many expected it to fall a lot further, because of fears of chaos.

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There is no City mantra better known than the one about markets hating uncertainty, and some analysts had predicted a much bigger slide in the value of sterling.

But in fact, it stopped there for hours, even as that exit poll was borne out over the course of the evening.

The pound took a tumble - a nasty tumble - but it didn't fall down the side of a mountain.

And then on Friday morning, the FTSE 100, our main index of shares, opened up, breaching the 7500 point mark and adding very nearly 1% in early trading.

You might just have asked yourself if the City was actually pretty pleased with what it was seeing.

The answer, as ever, is a bit of a mixture. Certainly most investors in the financial sector had, like the bookmakers and most observers, been expecting the Conservatives to win a comfortable overall majority.

When that didn't happen, ushering in the uncertainty of a hung parliament, the pound was sold off.

But something else happened - the immediate calculation that a so-called hard Brexit was now less likely.

That option - of walking away from negotiations, leaving a single market and reverting to the rules of the World Trade Organisation - has struggled to find many supporters in the City.

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The idea that a hard Brexit was now being pushed back seemed to inspire some to buy the pound, stemming its losses. It still fell, but not spectacularly.

So why did the FTSE 100 go up? Simply because it is an index of big companies, not a barometer of the British economy.

Over the past couple of decades, a growing proportion of those companies have earned the big bulk of their money in foreign currencies - but still report profits in pounds.

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So if the pound weakens by 1.5%, then immediately those overseas earning are worth 1.5% more. These days, when the pound weakens, the FTSE 100 rises mechanically.

The next 250 biggest companies in Britain have their own index, known, somewhat predictably, as the FTSE 250. That index is much more focused on British business, and far less prone to the effects of currency fluctuations.

On Friday, it fell by 1% on opening, but then it, too, recovered.

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Many are simply waiting to see what happens on two fronts - the profound question of who leads the nation and guides the economy.

But also the granular details of how the UK will approach Brexit, and whether a government will stick to the March 2019 deadline, or now try to negotiate a transitional period.

For British business, for the City, the investors and the nation's biggest industries - these are the questions that all need answering.

Until those answers come, you're going to hear a lot about that old City favourite - uncertainty - with investors, perhaps, earning the right to be heartily sick of electoral shocks.

In a sign of frustration, one senior investment banker said to me of Theresa May's election: "This is a total, unnecessary mess... we've got no faith in her as a Prime Minister."