CURRENCIES: Pound Renews Downdraft After Fresh Poll Results

By Sara Sjolin and Barbara Kollmeyer, MarketWatch Features Dow Jones Newswires

YouGov modeling comes up with a hung parliament after next week's ballot

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The pound was sent on a roller-coaster ride on Wednesday as traders reacted to conflicting reports about the support for U.K. Prime Minister Theresa May's Conservative Party in the June 8 general election

Sterling slumped to an intraday low of $1.2770--the lowest since mid-April--after a projection from a polling company indicated the Tories could lose its parliamentary majority in the vote next week. The pound fetched $1.2860 late Tuesday in New York.

YouGov research reported by The Times (https://www.thetimes.co.uk/article/latest-general-election-poll-predicts-conservatives-will-lose-seats-02zfwl8lc) showed the Conservatives might lose 20 seats in parliament, with opposition Labour Party gaining 28. May's party needs 326 to govern, therefore the loss of those seats would result in what is termed a "hung parliament."

(https://twitter.com/thetimes/status/869666865928433665)

A few weeks ago, the Tories stood to increase their majority in a landslide. Investors had been pushing the pound above $1.30 on hopes a bigger Conservative majority would strengthen May's negotiating power in the coming Brexit negotiations with Brussels, as the U.K. looks to establish fresh trade ties after its vote a year ago to exit from the European Union, dubbed Brexit.

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The YouGov modeling has created "uncertainty the market doesn't like," said Neil Wilson, senior market analyst at ETX Capital.

"A hung parliament is the nightmare scenario for May. It would constitute a massive personal failure and undoubtedly make for great domestic political uncertainty at the worst possible moment for Britain," he said in a note.

However, later on Wednesday sterling jumped to as high as $1.2865 after an opinion poll from Panelbase gave the Conservatives a 15-point lead over Labour.

"A 15-point cushion is more what Theresa May [and company] would like and this seems to be reining in some of the bearish bets on the pound. But it's hard to be particularly bullish when we have this added political risk premium which looks set to persist until after the vote," Wilson said.

Against the euro, the pound fell to EUR1.1446 from EUR1.1496, and against the , it slid to Yen142.42, from Yen142.54

Opinion:May will win the U.K. general election--and catapult stocks and the pound (http://www.marketwatch.com/story/theresa-may-will-win-the-british-general-election-and-catapult-stocks-and-the-pound-2017-05-24)

Elsewhere, the dollar inched up against the yen to Yen110.88, from Yen110.84 late Tuesday.

The euro rose to $1.1218 from $1.1187 after data showed inflation fell more than forecast in May, but unemployment was stronger than expected in April.

The shared currency has strengthened recently as the dollar has weakened on worries that U.S. President Donald Trump may have trouble pushing through policies aimed at stimulating U.S. economic growth.

Read:'Euro-dollar parity is dead,' say analysts (http://www.marketwatch.com/story/euro-dollar-parity-is-dead-say-analysts-2017-05-30)

Investors in the U.S. will be looking ahead to data in a busy week that finishes with nonfarm payrolls for May. On Wednesday, the Chicago purchasing managers index is coming at 9:45 a.m. Eastern Time, followed by pending-home sales for April at 10 a.m. Eastern and the Federal Reserve's Beige Book at 2 p.m. Eastern.

(END) Dow Jones Newswires

May 31, 2017 08:26 ET (12:26 GMT)