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Pound flat in Asia as election day looms

Fireworks for the British pound have yet to materialise on Thursday hours out from the opening of polls for the UK general election.

Sterling is flat at $1.2959 during morning trade in Asia. It has been as much as 0.1 per cent higher and lower today.

The currency has closed higher in seven of the past eight sessions to Wednesday, but is yet to surpass its eight-month high of $1.3036 hit in mid-May.

Against the euro, the pound was 0.1 per cent stronger today at €1.1520 after gaining 0.5 per cent on Wednesday.

Kit Juckes at Société Générale said of the possible election outcomes and their potential impact on the pound:

Firstly, a surprisingly sizeable Conservative majority (Conservative seats going up from 331 to over 340, say?) would be a relief for the Government, and for Mrs May. Sterling too, would probably benefit. The Gilt curve might flatten somewhat and we’d get back to watching economic data.

A majority that is barely bigger than the current one (17), or smaller, would be bad for Mrs may, might limit her ability to negotiate a Brexit deal (increasing the danger of leaving the EU with no deal) and would be slightly GBP-negative.

A result which left the Conservatives trying to form a minority government would multiply the uncertainty and be more negative for the currency.

A Labour/SNP working arrangement (I’m ruling out an outright Labour win) would hurt risk sentiment and sterling would fall then too, partly because Labour is also committed to leaving the EU and to regaining control of the UKs borders. However, such a deal is the only one which holds out the faintest possibility of a deal later to negotiate access to the Single Market (though that might well need a second referendum). Maybe this is a ‘buy on the dip’ outcome, though the dip would be substantial.