Pound steady before election

STERLING rose yesterday after dropping nearly half a cent against the dollar in early Asian trade in reaction to another militant attack in London at the weekend, days before a British parliamentary election. Saturday’s attack – the third in England in three months – saw sterling slip from $1.2893 to $1.2851 at the start of Asian trading.

A dip in an index of services sector sentiment had little impact, and sterling then jumped into positive territory after the latest poll from the ICM organisation showed Prime Minister Theresa May’s Conservatives 11 points in front of the Labour opposition.

That ran counter to other polls showing Thursday’s election race is extremely close, and helped push the pound 0.1 percent higher to $1.2907 by 10.20am. It gained 0.3 percent to 87.22 pence per euro.

Sterling has wobbled over the past two weeks, with investors’ confidence that May would secure a landslide majority shaken by opinion polls predicting a wide range of outcomes for the June 8 snap election.

Polls have results ranging from an increased majority for the Conservatives to a hung parliament – worrying investors who had bet a landslide win for May would translate into a stronger bargaining position in Britain’s exit talks with the EU, which begin on June 19.

“There’s greater two-way risk (to sterling). Even if May does just about enough to increase the majority – that could still potentially be sterling positive,” said ING currency strategist Viraj Patel.

“The worst case outcome is this grey area of uncertainty – the hung parliament and no stable government formed by Friday or Monday – markets will sell off on that.” – Reuters