The UK pound was weaker in Asia trading with the market unnerved by a closely-tracked poll that suggested a much tighter result in Thursday’s general election, raising the prospect of further delay to Britain’s exit from the EU.
Sterling fell as much as 0.4 per cent against the US dollar to $1.3105 on Wednesday following a poll of voters by YouGov that forecast a Conservative majority of just 28 seats in the House of Commons.
The research provider added that a hung parliament, in which no party secures a majority, was within the poll’s margin of error and it “absolutely cannot rule out” that possibility.
The currency had climbed about 8 per cent against the dollar since early October with polls consistently showing a clear Conservative lead. A previous YouGov poll conducted in late November forecast a larger Tory majority of 68 Commons seats.
“Over the last fortnight we’ve seen the Conservative lead and the number of seats they are projected to win gradually fall,” said Anthony Wells, director of political and social research at YouGov. “There are two days until polls close and time for voters to change their minds.”
Pound “bulls are getting a bit nervous as we approach election time”, said Rodrigo Catril, a Sydney-based currency strategist at National Australia Bank. He added that the YouGov poll, which has a sample size of over 100,000, was well regarded among investors for its accuracy.
The UK currency later pared some of its losses to trade 0.2 per cent lower against the dollar at $1.3130. The pound was little changed against the euro at €1.1090.
The YouGov poll forecast 339 seats for the Conservatives and 231 for the Labour opposition. “Anything sub-340 will not be welcomed by the market,” said Jordan Rochester, a currency strategist at Nomura in London, referring to the number of Tory seats post-election.
Investors are anxious at the prospect of a hung parliament — an outcome that could mean further delays to the UK’s withdrawal from the EU, adding further uncertainty to the country’s economic outlook.
A Tory return of 314 seats or fewer would raise the prospect of Labour’s Jeremy Corbyn becoming prime minister, Mr Rochester said.
Investors fear the 70-year-old leftwinger’s economic plans — which include extending full-fibre broadband to every home and nationalising rail and energy industries — could prompt a splurge in public borrowing.
If incumbent prime minister Boris Johnson “is unable to secure a majority then we wouldn’t be surprised to see cable heading back towards a $1.20 to $1.25 range”, said Mr Catril, referring to the sterling-dollar exchange rate.
An outright Tory majority could push sterling up to a more than 18-month high of $1.36, he added.