The General Election exit poll which suggested the country could be heading to a hung parliament has resulted in a fall in the pound.

It plummeted against the US dollar and euro on the back of the shock exit poll, which suggests Tories will fall short of an overall majority despite being the largest party.

Many had tipped the Conservatives to won a landslide victory when Prime Minister Theresa May called the snap election in April .

Sterling dived over 1.5% to 1.27 US dollars following the poll, and against the euro, the pound fell over 1% to 1.13 euros.

If the poll is correct, Conservatives would be the largest party, but 12 short of the 326 required for a parliamentary majority.

Labour would end up with 266 seats, the Liberal Democrats with 14 and the SNP on 34.

James Knightley, senior economist at ING, said: “Given Labour’s left wing tax and spend manifesto and desire to nationalise the utility, rail and mail industries, markets are not going to react well if this is the outcome.

“The fear of higher deficits and national debt is leading to a spike in government bond yields.

“Meanwhile the greater chance of a Scottish Independence referendum in the next couple of years (Labour may have to offer this to get the support of the SNP) will intensify political uncertainty and it is already weighing heavily on the pound.”

Markets had priced in a Conservative victory with a healthy majority, giving Theresa May free rein to take charge of Brexit negotiations unhindered.

Has Jeremy Corbyn (right) won enough support in London to beat the Tories?

Neil Wilson, senior market analyst at ETX Capital, said: “Has May’s great gamble failed? If accurate a hung parliament leaves Theresa May’s position as leader in serious doubt and makes the process of Brexit incredibly uncertain.

“It’s fair to say the City was pretty confident of a Conservative majority.

“A hung parliament throws open all kind of doubts, uncertainty and indecision over the looming challenge of Brexit. We have the possibility of a coalition government and all that entails.”

But observers also believe that a hung parliament makes the prospect of a so called hard Brexit less likely, which would be welcomed by markets and the world of business.

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