FX round-up: Cable casts off UK poll-induced softness to finish higher

Sterling mostly cast off its earlier softness sparked by election poll jitters in the market to chime in Wednesday's close on a positive note not far below resistance at about $1.29.

At 17:21 BST, sterling ws up 0.28% to $1.2895. It was also up on the aussie, loonie, kiwi, rand and yen, but dropped on the euro.

The YouGov/Times poll raised the prospect of a hung parliament, while a PanelBase one gave the Tories a 15-point lead over Labour.

"It looks like the FX market has decided to shrug off that YouGov survey which indicated a hung parliament is the most likely outcome from the June 8th poll," said Neil Wilson, senior market analyst at ETX Capital.

"Instead the pound was buoyed by a PanelBase poll that gives the Tories a very healthy 15-point lead over Labour," he said, also noting the "usual" month-end rebalancing taking place in the FX market.

Joshua Mahony, market analyst at IG, opined that sterling's recovery was a surprise. It followed somewhat underwhelming UK economic data out earlier.

"Ultimately, the polls remain largely in favour of a Theresa May win, despite her uninspiring and surprisingly out of touch decisions," said Mahony.

Wilson observed the quick shift in sentiment "on a couple of polls," commenting this highlighted the kind of volatility and uncertainty facing investors ahead of the vote.

"Sterling looks set for a pretty rocky week. And from today’s oscillations it does increasingly look like the fx market thinks a strong Tory majority is pound-positive."

Meanwhile, the British currency was down 0.13% to €1.1481, while the dollar was down 0.43% to €0.8902.

Michael Hewson, chief market analyst at CMC Markets UK, said the euro had a decent day in the wake of improvement seen in the latest European economic data.

"On the inflation front we saw a slight softening in May as EU CPI fell back from 2% to 1.5%," said Hewson.

"In so doing (that) relieved some of the pressure on the ECB ahead of next week's policy meeting, where the pressure had been increasing for the governing council to look ahead to a possible tapering of monetary policy in the face of better growth prospects and rising inflation."

Turning to the US dollar, it was up on the aussie, loonie and rand, but down on the kiwi, yen and, as mentioned higher, the cable.

Wilson continued: "Bulls are finding resistance (in the cable) around $1.291 pretty hard to break through and at last look the rally is running out of steam a bit.

"There is a chance it can drive on to $1.30 with the right tailwinds."

For that, investors will be looking to a string of US and UK in the diary for Thursday and Friday.