LONDON — The pound gained ground on Wednesday as Britain saw the final day of campaigning ahead of Thursday’s general election.
Polls suggest that Theresa May’s Conservative Party hold a lead of around six points over Jeremy Corbyn’s Labour Party, although outliers suggest that lead could be as big as 12 points, or as small as one point.
While a big move in the price of sterling is expected once results start to come out on Thursday evening, investors in Britain’s currency were largely in wait and see mode ahead of the vote.
Sterling was flat for most of the day before gaining ground mid-afternoon, thanks largely to weakness from the dollar as investors in the greenback started to worry about the political implications of former FBI Director James Comey’s appearance in front of Congress on Thursday.
By 4.50 p.m. BST (11.50 a.m. BST) sterling was up 0.3% against the dollar to hit $US1.2952, as the chart below shows:
When it comes to the election, markets are generally priced for a big Conservative victory, Samuel Tombs of Pantheon Macroeconomics wrote on Wednesday, even though some forecasting models predict a hung parliament.
“A comfortable Conservative win probably would boost sterling to only $US1.30, given that it is the main scenario priced-in currently, and some hard Brexit risk will linger regardless of the size of the Tories’ win. By contrast, we think sterling could fall back to around $US1.26, if the Conservatives fail to win more than a handful of extra seats,” Tombs wrote.