Pound sterling recovers after latest poll shows Conservatives still in lead

The pound added around 0.4 per cent against the dollar and the FTSE 100 closed near an all-time high

The pound has rallied sharply since Theresa May called for a general election (Reuters)

The pound recovered from a sharp fall in early trading on Wednesday and the FTSE 100 ended the session near a record high, after a new poll showed the Conservative Party still firmly in the lead ahead of next week’s general election.

Late afternoon in London, the pound was changing hands at $1.2911, up 0.4 per cent on the day. Earlier in the session it had slipped to a one-month low against the US dollar, briefly making it the worst performing major currency, after a seat-by-seat prediction by YouGov suggested that the Conservatives were on course to win 310 seats at the election – short of an absolute majority of 326 seats needed to form a government.

Later, research company Panelbase put Theresa May’s lead over the Labour Party at 15 points.

“We’re used to this ahead of elections. It was similar before the Brexit referendum and we should expect volatility when traders are basing decisions on pretty unreliable polling data and volumes are thin,” said Neil Wilson, a market analyst at ETX Capital. “It’s going to be pretty choppy for the next few days as the pound looks set to be buffeted by conflicting polling data.”

Sterling fell around 2 per cent last week after polls showed the Conservatives’ lead over Labour 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 it’s up for the year and rallied sharply after Ms May called for a general election. Strategists at the time said that investors were buying the pound on hopes that a vote would strengthen Ms May’s hand in Brexit negotiations.

Elsewhere in financial markets on Wednesday, London’s FTSE 100 closed near an all-time high, making May its best month since December.

The UK’s benchmark stock index ended the session flat after cutting its gains in late trading. It rose more than 4 per cent during the month, taking its climb so far this year to more than 5.5 per cent.

The FTSE 100 is largely made up of major international corporations that generate revenue abroad, meaning that it tends to perform well when the pound is weak. But Mr Wilson of ETX Capital said that on Wednesday there were signs of that inverse relationship starting to break down.

“The markets seem to be saying that a strong Tory majority is better for the pound and better for equities,” he said.