Britain’s pound recovered a foothold on Wednesday after this week’s fall from 8-month highs, with traders eyeing US Federal Reserve minutes later in the day for fresh direction with campaigning for June elections suspended. Opinion polls at the start of this week showing Prime Minister Theresa May’s lead cut in half, and a U-turn on a controversial policy promise on Tuesday had undermined markets’ faith in a convincing victory for her Conservatives on June 8.
Political parties have all halted campaigning after a bombing in Manchester on Tuesday evening killed 22 and injured dozens more. Dealers will look to the Fed’s minutes for more signs of support for the dollar from rising interest rates in the months ahead. In a light week for data, a more detailed breakdown of UK GDP numbers for the first quarter is due on Thursday.
Sterling was 0.1 pecent higher at $1.2972 and 86.18 pence per euro in morning trade in London.
“The pound has been showing signs of reversal after stalling out above $1.30 though the setbacks are understandable with an important UK election coming up and tough Brexit negotiations still a major concern,” said Joel Kruger, a currency strategist with LMAX Exchange in London.
“(The) absence of first tier UK data will leave the focus on the U.S. (today).”
The pound has risen 7 percent since hitting lows close to $1.20 in mid-March and is up almost 4 percent in broader trade-weighted terms in the same period.
But some of the banks that championed a recovery for sterling have grown more cautious, saying it now looks more fairly priced given the risks related to Britain’s plan to leave the European Union.
“At the moment we’re reassessing,” said Lee Hardman, an analyst with Japan’s MUFG in London. “We don’t really want to chase these moves from here.”