Britain’s pound fell back below $1.30 on Monday after a pair of polls over the weekend showing Prime Minister Theresa May’s opinion poll lead falling back into single figures ahead of next month’s election. Sterling has risen in the past month, in part on the assumption that a May landslide would strengthen her hand over hard-line Brexiteers in her ruling Conservative Party and allow her to negotiate a smoother departure from the European Union. But her perceived weakness on the campaign trail, and a mixed reception for last week’s election manifesto, has underwritten a recovery for the opposition Labour Party.
A Survation telephone poll published on Monday showed May’s lead halving to 9 percentage points, with Labour up 5 points and the Conservatives down 5. “While a 9-point lead could still give Theresa May a comfortable victory on 8th June, the fact her lead has been slashed in half in just a few days may reinforce to financial markets that her victory is not a certainty,” said Kathleen Brooks, a market analyst with City Index in London.
“Another bad PR week … and the Tories’ lead over Labour could fall further into the low single figures, which could encourage sterling selling.” In morning deals in London, the pound was down just over half a percent, bypassing lows hit early in the Asian session to trade as low as $1.2967. It also dipped 0.1 percent to 86.09 pence per euro.
Senior Conservative ministers on Sunday defended proposals to reduce state support offered to elderly voters despite concerns that it could undermine support among ageing, wealthy homeowners – a core source of Conservative votes.
Monday’s poll showed that respondents were more likely to say that Labour, rather than the Conservatives, had the best policies for older people and pensioners, as well as young people and the state-funded healthcare service.
With the centrist Liberal Democrats struggling to challenge May in her party’s southern English heartlands, a 9-point lead should still see the prime minister win handsomely. But investors are mindful that if she loses, it would again throw the Brexit process into turmoil.
“I don’t think anyone can ignore the thought at least that this could be another shock. We have two weeks to go and all sorts of things could happen,” said Neil Mellor, senior currency strategist with Bank of New York Mellon in London. “We are round this $1.30 level. It is obviously a pivotal level and people need to be sure before they start building in their positions. At the moment the timing has come just as the market is undecided.”