FX round-up: Sterling takes big slides lower on UK election uncertainty

Sterling took big slides lower on most major crosses Friday as political uncertainty surrounding the upcoming UK general election sparked a wave of selling.

At 15:43 BST, sterling was down 1.1% to $1.2800, and down 0.81% to €1.4151. It also flopped on the aussie, loonie, kiwi, rand and yen.

The latest polls from YouGov showed that Theresa May's Tories had only a five-point lead over Jeremy Corbyn's Labour.

"A five point gap looks to have been the breaking point," said Jasper Lawler at London Capital Group, also noting that the poll had caught the market off guard.

Michael Hewson at CMC Markets UK said it had not been a good week for Prime Minister May, following her shambolic manifesto U-turn.

"Recent policy missteps by Mrs May have seen the election campaign take on the look of an 'ugly contest' of mediocre candidates, and that appears to be being reflected in the recent performance of the pound," said Hewson.

FXTM's Lukman Otunuga agreed with the theme of political uncertainty having hit the pound hard.

"The threat of Theresa May failing to secure a landslide election victory should weigh heavy on Sterling moving forward as anxiety heightens over her ability to strengthen her hand in the Brexit negotiations," said Otunuga.

"With political uncertainty likely to heighten ahead of the UK general election on June 8, Sterling could become even more attractive to bears," he said.

All of this was against a backdrop of yesterday's disappointing UK Q1 GDP growth figures.

"The visible deceleration in economic growth is a clear sign of Brexit negatively impacting the UK as rising inflation and tepid wage growth drains consumer confidence," he said.

"Sentiment is turning increasingly bearish towards the Pound with further downside expected as sellers exploit the Brexit anxiety to attack."

Meanwhile, the US dollar had a more pleasing session than sterling, but did not get everything entirely its way.

The dollar-spot index was up 0.13% to $97.377, with the greenback up on the euro and aussie, but down on the loonie, kiwi, rand and yen.

"The greenback has been on the back foot for the most part of this week with upside gains limited following (the month of) May's Federal Reserve meeting minutes which was dished with a dovish undertone," said Otunuga.