The pound fell sharply in early trade on Friday after a British election exit poll showed Prime Minister Theresa May’s Conservative Party falling short of a majority, likely resulting in a hung parliament.

If the exit poll proves correct, the shock result would plunge domestic politics into turmoil and could delay Brexit talks.

Sterling was down 1.4% at US$1.2780 after sliding to as low as US$1.2705, down about 2% and the weakest since April 18.

The pound dived over two US cents in a matter of seconds in Asia, though most stocks and bond markets were relatively unscathed awaiting further results.

E-mini futures for the S&P 500 were off 0.2%, while Japan’s Nikkei added 0.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan was barely changed.

The exit poll predicted the Conservatives would win 314 seats in the 650-member parliament and the opposition Labour Party 266, meaning no clear winner and a “hung parliament.”

But few seats had been declared by 0728 GMT, and the BBC reported that 76 seats appeared too close to call.

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The exit poll predicted the ruling Conservatives would win 314 seats in the 650-member parliament and the opposition Labour Party 266, leaving no clear winner when markets had assumed May would easily increase her majority.

Betting agencies were already taking wagers on whether May would lose her job.

“It’s clear that the election is a humiliation for the Tories, who blew a massive poll lead in just a few weeks,” said Sean Callow, senior currency analyst at Westpac.

Britain's Prime Minister Theresa May and her husband Philip arrive at the count centre for her seat for the general election in Maidenhead, June 9, 2017. REUTERS/Toby Melville
Britain’s Prime Minister Theresa May and her husband Philip arrive at the count centre for her seat in Maidenhead. Photo: Reuters/Toby Melville

He predicted a hung parliament would strip the pound of all the gains made since the election was called and leave it wallowing around US$1.2500.

Movements in other major currencies like the dollar, euro and yen were limited, also having taken in stride a testimony by former FBI director James Comey, which was initially expected to be the other big event of the week.

“There were many participants who wanted to take advantage of the volatility resulting from a key event like the British elections, which explains the pound’s initial steep drop,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“The swings in the pound have not spilled over into other currencies as the market was well hedged and prepared for a variety of election scenarios.”

The dollar was flat at 110.010 against the safe-haven yen.

The euro extended overnight losses and was 0.1 percent lower at US$1.1199.

The common currency was capped after the European Central Bank on Thursday cut its forecasts for inflation and said policymakers had not discussed scaling back its massive bond-buying program.

Comey accused President Donald Trump of firing him to try to undermine its investigation into possible collusion by his campaign team with Russia’s alleged efforts to influence the 2016 presidential election.

While this was the most eagerly anticipated U.S. congressional hearing in years and was approached by investors with caution, it did not offer fresh insight for the financial markets. The Nasdaq managed to close at a record high on Thursday.

Buoyed by the pound’s fall, the dollar index against a basket of major currencies was up 0.3% at 97.236.