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Pound under pressure after survey indicates tight UK election

The British pound has come under pressure following research by pollster YouGov suggesting that Theresa May, UK prime minister, could see her parliamentary majority whittled away in next week’s general election.

Sterling was the worst performing major currency on Wednesday, down 0.3 per cent at $1.2817, after being down as much as 0.6 per cent.

The pound was 0.4 per cent weaker against the euro, with £0.8731 required for a unit of the shared currency. Sterling’s fall against its nearest neighbour took it back towards the £0.8750 mark it reached on Friday, when the Conservatives’ lead in the polls also slipped.

Sterling has become more of a political currency in recent months, with its moves partly being driven by the prospects for Mrs May’s government and the forthcoming Brexit negotiations.

“The importance of politics as a market driver currently can’t be overstated,” said Kit Juckes at Société Générale. “We’re supposed to treat polls with suspicion but needless to say, we remain bullish on the euro against the pound.”

Sterling was testing Friday’s lows at around the $1.28 mark in early trading on Wednesday, after YouGov’s modelling indicated that the risk of the UK suffering a hung parliament at next month’s election had grown.

The YouGov study suggested Mrs 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.

However, the research had a wide error margin, YouGov said. Another pollster, ComRes, forecasts a 100-seat Conservative majority.

The pound had closed 0.2 per cent higher on Tuesday, before the model was released. Against the dollar, the pound remains almost 2 per cent higher since Mrs May called the UK’s snap election on April 18.

Nomura analysts warned that a Labour win would result in sterling initially trading lower, before recovering as the prospects of a softer Brexit came into view.

“The tightening in the polls looks set to keep GBP on the back foot into this election,” they said.