Sterling was recently hovering around $1.28 against the dollar, near a one-month low. Bloomberg data showed that the pound was the worst performing of all major currencies on Wednesday.
The latest seat-by-seat prediction by YouGov for The Times suggests that the Conservatives are on course to win 310 seats at the election – short of an absolute majority of 326 seats needed to form a Government.
“While all the polls still project that the Conservatives will be ahead on 8 June, the sharp recent reduction in the party’s lead, poor poll reliability in past votes, plus an unusually high level of uncertainty about the key issues and how different groups could vote, make this election tricky to call, says Kallum Pickering, an economist at Berenberg. “To put it one way, we would not be very surprised if there was surprise.”
Geoffrey Yu, head of the investment office at UBS Wealth Management said that if the latest poll proves accurate, he would expect markets to be shaken.
“Yet today’s poll distracts from the many others showing that a Conservative majority remains the most likely outcome, as is our base case,” he adds. “With no further indications of a hung parliament, the recent fall in sterling may be seen as a buying opportunity for investors.”
The pound already fell around 2 per cent last week as polls showed the Conservatives’ lead over the Labour Party had shrunk from as much as 20 points in April.
The currency remains about 13 per cent lower against the dollar since last June’s Brexit referendum, but had until recently been edging tentatively higher this year.
It rallied sharply after Theresa May’s 18 April announcement of a general election, with investors hopeful that a vote would strengthen the Prime Minister’s hand in Brexit negotiations.