The pound plunged to its lowest level in six weeks against the dollar amid fears a hung parliament could dent Brexit negotiations.
Sterling fell as much as 2% against the greenback in response to a shock exit poll released at 10pm on Thursday night (8 June), which forecast the Conservative Party would fall short of winning an overall majority.
The pound recouped some of the losses, after results began trickling in and the first constituency results just before midnight showed the swing towards Labour was not as sharp as the exit poll predicted.
However, by 4am on Friday morning sterling remained 1.71% and 1.28% lower against the dollar and the euro respectively, trading at $1.2735 and €1.1399.
"After that first initial sell-off on the exit poll we've actually seen precious little movement in cable [the pound/dollar exchange rate]," said Neil Wilson, senior market analyst at ETX Capital.
"Trading is pretty thin overnight and the volumes will increase markedly later this morning when traders in London arrive at their desks, which might produce some more decisive price action."
Kathleen Brooks, research director at City Index, added: "Uncertainty is likely to keep pressure on the pound, which has fallen to the base of its recent range.
"In GBP/USD $1.2530 – the low before the election was called – is a key support level. Right now, the market is not in panic mode, but it is shell shocked by this result."
While the Conservatives remain on course to be the biggest party in the country, they are forecast to fall a few seats short of an overall majority, a hugely surprising result given the last poll before the election gave them a seven point lead over Labour.
Even in the event the Tories manage to get the 326 seats required to form a government, the outcome of the election will strongly undermine Prime Minister Theresa May, who had looked to secure a landslide win when she called the snap-election back in April.
"Theresa May is a toast now and it does not get any worse than this for her," said Naeem Aslam, chief market analyst at Think Markets UK.
"The public has voted against Theresa May rather than anything else."
Throughout her campaign, May repeatedly stressed she needed a strong mandate to secure the best Brexit deal possible but the election appears to have significantly undermined her position. Michael Hewson, chief market analyst at CMC Markets, said the result could threaten the Brexit negotiations, which are due to begin in 11 days time.
"What this [the prospect of the Tories not winning an overall majority] means for Brexit talks is difficult to say, given the clock is already ticking, but given that the SNP and Lib Dems want to stay in the single market the odds are rising that Brexit may well not happen," he said.
"Labour has said it wants to stay in the single market while ending freedom of movement, a position that the EU are unlikely to accept."