Pound Falls on tighter polls

Published May 26, 2017

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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.

BLOOMBERG

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