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Pound holds steady at two-week high on election day

Steady as she goes.

The pound is holding at a two-week high as the UK goes to the polls for its second general election in 13 months today.

Sterling is trading practically flat against both the dollar and euro, at $1.2962 and £0.8686 per euro at publication time. Polling booths in Britain opened at 7am (BST) and will close at 10pm tonight in the snap election called back in April.

Theresa May’s surprise decision to hold the vote lifted the pound as much as 4 per cent against the dollar, but a narrowing in the polls between the Conservatives and Labour has knocked sterling back in the last month.

Still, expectations of further volatility in the currency after today’s vote are muted. Implied sterling volatility over the next month, a gauge that tracks speculation in future moves in the currency, is at modest levels (see chart below).

Investors will be keeping an eye on the first exit poll which will be released at 10pm and have historically provided the best early indicator of the eventual result. For more on the history of exit polls, here’s the FT’s resident polling analyst, Matt Singh.

The FT’s poll of polls currently has the Tories with a six-point lead at 43 per cent, with Labour on 36 per cent.

The “worst case scenario” for the pound, according to Petr Krpata at ING, would be “an even smaller Conservative majority or a hung parliament”.