Pound falls 0.3% vs dollar after attacks

The Pound Sterling touched on its highest price in two weeks versus the US Dollar as expectations of a Conservative party win in Thursday's general elections begin to gather momentum.

The currency has traded choppily in recent weeks as polls indicate a significant narrowing in the race for Downing Street. A poll published by Survation on Monday night puts the Tories just one point ahead of Labour.

A Labour win is also expected to hurt the pound in the short term, sending it back below $1.25, although the prospect of a majority for Jeremy Corbyn is seen as better than a hung parliament and chaotic coalition.

The pound traded 0.2 per cent weaker at US$1.2861 as of 5.58am in Sydney.

"In the markets there is a very simple rule of thumb: the larger the Conservative majority becomes, the more positive that is for sterling", Adam Cole, head of global foreign exchange strategy at head of global foreign-exchange strategy at Royal Bank of Canada, said in an interview with Bloomberg Television before the weekend's terror attack.

Pound falls 0.3% vs dollar after attacks

"The markets are positive about the prospects of Prime Minster Theresa May emerging the victor of tomorrow's vote, as current polls indicate a secure lead for the Conservatives. Whether Britons were seriously swayed in the aftermath of Saturday's attack will be known on Thursday, but I think if the Conservatives manage to increase their lead it could potentially send GBP/USD above 1.3".

"Yes, the United Kingdom election is still something which markets are still worrying about, but one thing which is pretty much certain within the United Kingdom elections is that there is no (Brexit) U-turn on the cards", wrote ThinkMarket analysts in a research note.

The EUR/GBP is trading at 0.8714 Pence, down 0.14% and off the session low of 0.86998 Pence. The pound faces a major test'.

However, most analysts predict that a hung parliament is still unlikely. If the Conservatives win and form the government they will be in a stronger position to negotiate Brexit and that's one of the reasons behind the recent strength of pound.

  • Zachary Reyes