Sterling off 12-day high, investors still eye Conservative win
- Author: Zachary Reyes Jun 08, 2017,
Jun 08, 2017, 3:38
Sterling gained as much as 4 per cent after prime minister Theresa May called a snap election seven weeks ago with polls suggesting a landslide win for her Conservative party would give her a stronger hand in Britain's negotiations on leaving the EU.
Having been largely subdued in early trading, sterling advanced throughout the day and by mid-afternoon it was 0.17% and 0.55% higher against the dollar and the euro respectively, trading at $1.2933 and €1.1513.
Hussein Sayed, chief market strategist at FXTM, says in a morning note: "The pound managed to remain bid, despite the weaker than expected PMI data and conflicting poll outcomes".
"At the other side of the spectrum a Tory majority of about 40 seats should see the pound strengthen although not markedly as this outcome is partly priced in".
"However, there is still caution over the remote possibility of a hung parliament or a Labour victory, which investors fear would sink the pound in the aftermath of the election".
Despite keeping gains versus the dollar, sterling has fallen 2.5 percent in trade-weighted terms in less than four weeks since polls first suggested a narrowing lead for the Conservatives.
Against the euro, it was 0.1 percent higher at 87.28 pence, investors also awaiting the European Central Bank's policy announcement on Thursday for clues on its stance towards tapering its stimulus programme.
"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. "Should this be rejected, I would expect the moves to quickly reverse".
At around 8am the exchange rate hit a high of €1.14979 to the pound - up from lows of €1.13972 earlier in the week. The AUD/USD is now trading at $0.7483, down 0.02%; earlier the pair had hit a session low of $0.74567 while the peak stands at $0.74972.
Aside from gaining against the euro, the greenback was 0.16% and 0.36% higher against the yen and the Swiss franc respectively, trading at ¥109.58 and CHF0.9656.
The Pound traded within a narrow range versus the Euro, fluctuating between 1.1420 and 1.1480 and it's a similar story against the vast majority of the 16 most actively traded currencies.