London - The UK election just got interesting for pound
traders. Sterling fell against all of its 16 major peers on Friday after a poll
showed the Conservative Party’s lead over the main opposition Labour Party has
narrowed to five percentage points with two weeks to go until the June 8 election.
That comes after weeks of surveys showing a bigger Tory lead had made the vote
all but a foregone conclusion for the market.
“We’re potentially in the trouble zone,” said Neil Jones,
head of hedge-fund sales at Mizuho Bank. “Sterling correlates well with
anything that shows a Tory majority and vice versa, so if you’ve got this
situation where the majority closes right down, it may come to a critical level
where it may not have a sufficient number of seats in the house. The market
doesn’t like that.”
The YouGov Plc poll feeds into a souring atmosphere for the
pound with the UK terror threat remaining at “critical” levels following the
Manchester attack and disappointing growth data for the economy Thursday. An
index compiled by YouGov and the Centre for Economics and Business Research
also indicated consumer confidence fell this month to its lowest since Brexit.
While the latest poll was conducted after the Manchester
terror attack, the Tories’ narrowing lead was more likely to have been caused
by a row over an unpopular policy on elderly care, Anthony Wells, a research
director at YouGov, told the Times newspaper. Most previous surveys had given
Prime Minister Theresa May a lead about 10 points or above.
The pound fell 0.5 percent to $1.2875 as of 9:24 a.m. in
London, having touched $1.2861, its lowest in two weeks. Support for the
currency lies at $1.2845, the May 12 low.
Read also: Pound wobbles on mounting Brexit fears
Conservatives at 43 percent, Labour 38 percent, LibDems 10 percent, Ukip 4 percent, in
YouGov/Times poll. The previous YouGov poll had Conservatives at 44 percent, Labour 35 percent “GBP
is likely to continue to be under pressure now until the election is out of the
way if polling continues to indicate it’s a tighter race,” says Jordan
Rochester, a foreign-exchange strategist at Nomura International in a note to
clients.
“The worst outcome is if we have further uncertainty with
the chances of a hung parliament.” Sterling sell stop-loss orders were triggered
in Asian markets, said traders who asked not to be named as they aren’t
authorised to speak publicly.
A Telegraph report suggesting that the Manchester
suicide bomber may have distributed more explosive devices also added to
selling pressure, they said Political parties resume campaigning, with Labour
leader Jeremy Corbyn due to give a speech at 11:00 a.m.