Pound Edges Higher as May's Lead in Polls Stabilizes

  • ‘Hard to see’ Conservatives’ advantage narrowing further: CBA
  • May emerges largely unscathed from Monday’s key TV interview

UBS' Yu Expects Support for Sterling Heading into 2018

The pound rose for the second day as fears that Theresa May’s lead in pre-election polling could be slipping were somewhat allayed following a Monday night television interview.

Both May and opposition Labour Party leader Jeremy Corbyn were grilled in separate interviews with Sky News and Channel 4, and also faced questions from voters ahead of the June 8 election. Against a backdrop of narrowing polls -- increasing concerns in the market that she may not get as large a majority as previously expected -- the British Premier left the confrontation largely unscathed.

A shrinking lead in the polls for May is “bad news for the pound and clearly markets have been trading it that way in the last couple of weeks,” Peter Kinsella, a senior foreign-exchange and rates strategist at CBA Europe, said in an interview with Bloomberg Television. “It should be stated, however, that the Conservatives still maintain a very healthy 10 or 11 point lead in the polls and it would be hard to see that compress much further.”

Since a poll last week that showed the Conservative Party’s lead narrowing to five points over Labour, few have shown further tightening. A Guardian/ICM poll released Tuesday, but completed after the television questioning, showed May’s party leading by 12 percentage points. Should that remain the case, May would likely still increase her majority in the parliament’s lower house, potentially reducing opposition to her Brexit negotiation strategy.

  • GBP/USD rises 0.3% to 1.2874 having earlier touched 1.2888, the highest this week
    • Resistance at 1.2900, May 18 low; support at 1.2776, May 26 low
  • NOTE: Labour’s Corbyn fumbles on figures for free-child care policy
  • 10-year gilt yield -1bp at 1.00%
(Corrects chart resistance level in second bullet of story originally published on May 30, 2017.)
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