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Pound slips as YouGov poll forecasts tight election race

The British pound was under pressure in late Asian trade following a poll that suggested the risk of the UK suffering a hung parliament at next month’s election had grown.

Sterling was the worst performing major currency on Wednesday, down 0.3 per cent at $1.2817 in late Asian trade, and had been down as much as 0.6 per cent. The falls came in the wake of a YouGov poll that showed Prime Minister Theresa May’s Conservative party could lose 20 seats in the June 8 vote, while Jeremy Corbyn’s Labour party could pick up 30 seats, leaving neither side able to claim a majority victory.

The pound closed higher by 0.2 per cent on Tuesday before the model was released. Sterling closed above $1.30 on May 19 and 20 for the first time since the end of September.

Analysts at ING said Tuesday’s strength in the pound was probably driven by weakness in the euro, brought about by dovish comments from European Central Bank president Mario Draghi, than underling strength in sterling.

“With June UK elections ten days away, we expect GBP to trade with a political risk premium ahead of the event (unless polls start pointing to a material Conservative party lead). We see a limited scope for a domestically driven GBP strength,” they said.