Sterling fell on Friday after a poll showed a narrowing lead for British Prime Minister Theresa May over her opposition ahead of elections next month, while weakness in oil prices dragged on commodity-linked currencies.
In a sign that the June 8 election could be more closely contested than previously thought, a YouGov poll published on Thursday showed that the opposition Labour Party had cut the lead of May’s Conservatives to five points.
Sterling fell 0.5 percent to $1.2884, pulling further away from its May 18 peak of $1.3048, the pound’s strongest level since September last year.
The assumption that a landslide election win for May would strengthen her hand over hard-line Brexiteers in her ruling party and allow her to negotiate a smoother departure from the European Union, had been a source of support for sterling.
That view, however, has been challenged by recent opinion polls that showed a slide in the lead of the Conservatives.
The narrowing lead for May brings in the risk of a messier Brexit. We think the pressure is on here. We could see a significant move lower (in sterling) provided these uncertainties in the polls persist.