U.K. election jitters drive sterling ahead
The pound moved firmly higher on Monday, rebounding after its worst loss in four months logged last week on concerns that the upcoming general election in the U.K. will be tighter than most people expected.
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Sterling bought $1.2825, compared with $1.2803 late Friday in New York. Friday's slide marked the worst one-day percentage loss for the pound since January 18, according to FactSet data. Earlier last week, the U.K. currency had traded firmly above $1.30, but a surprise downward revision to the country's gross domestic product number and the latest opinion polls for next week's vote zapped investor confidence in the pound.
On Friday, a YouGov poll for the Times newspaper (https://www.thetimes.co.uk/article/tory-lead-cut-to-five-points-as-corbyn-closes-in-on-may-rgmckfnpp) showed the lead for the ruling Conservative Party narrowed to 5 percentage points over the Labour Party. That marked the smallest margin over Labour since Prime Minister Theresa May came into power last summer after the country's Brexit vote.
Another ICM poll out on Sunday published in the Sun newspaper gave May's Tories a 14-point lead, little changed from another ICM survey on May 22 (https://www.thesun.co.uk/news/3666236/theresa-may-terror-crisis-general-election-poll-lead/). Earlier in the year, the Conservatives were more than 20 points ahead, according to the Telegraph's poll tracker (http://www.telegraph.co.uk/news/0/general-election-2017-polls-latest-odds-tracker/).
"The June 8 U.K. election is approaching, and the polls suggest a tighter race than anyone expected, including most of all Prime Minister May," said Marc Chandler, global head of currency strategy at BBH, said in a note on Monday.
"We suspect that if investors thought that Labour's Corbyn would be next Prime Minister, sterling would be considerably lower," he added.
The pound rose sharply after May in April called a snap election for June 8, on hopes she could capitalize on the strong support in the polls and increase the Tories' majority in parliament. Traders hoped such a scenario would strengthen May's negotiating position when Brexit talks with Brussels kick in in earnest.
In other currencies on Monday, the dollar was mixed against major rivals, with the ICE Dollar marginally higher at 97.417. U.S. and U.K. financial markets were closed for separate holidays, so trading was thinner than usual.
The euro was down at $1.1175, compared with $1.1182 on Friday.
The yen was largely flat against the dollar. The greenback bought Yen111.32, compared with Yen111.34 on Friday.
(END) Dow Jones Newswires
May 29, 2017 10:13 ET (14:13 GMT)