FX Focus: Pound edges higher as polls show Conservatives retain healthy lead

The bank holiday weekend looks to have reinvigorated the pound, which crept higher against both its main rivals on Tuesday (30 May), as Theresa May's lead in the polls remained unchanged.

By early afternoon, sterling was trading 0.20% and 0.22% higher against the dollar and the euro respectively, fetching $1.2864 and €1.1522. The pound had tumbled to a two-month low at the end of last week after a new YouGov poll cut the Conservative Party's lead to just five points.

However, the gap did not reduce any further after both May and Labour leader Jeremy Corbyn were grilled during separate interviews on Monday.

"It is worth noting that the Tories still hold a sizeable lead over Labour, and the change in their fortunes remains outside the margin of error, according to Survation who prepared the survey," said Kathleen Brooks, research director at City Index.

"Thus, unless they have another catastrophic week then Number 10 could be Theresa May's for the taking in nine days' time."

Chris Saint, senior analyst at Hargreaves Lansdown, said that with the election now less than 10 days away investors were likely to focus on polling this week.

"Whilst Thursday's manufacturing PMI data could provide a steer on the economy's more recent performance after last week's disappointing first-quarter GDP figures, a relatively quiet UK economic calendar means data may not have a big say on the pound's direction unless there are significant surprises," he added.

Greece troubles weigh on euro

Elsewhere, the euro came under pressure in early trading amid fears over Greece's bailout programme. Overnight, finance minister Euclid Tsakalotos warned the country's fragile recovery could be dealt a crucial blow if Eurozone finance ministers fail to agree to release its next loan in June.

"We can't accept a deal which is not what was on the table," he said.

"What was on the table was if Greece carried out its reform package then creditors would ensure that there would be a clear runway through clarity for debt."

The common currency shed 0.5% to $1.1130, before recovering to trade at $1.1179. The prospect of an early Italian election and comments from European Central Bank (ECB) President Mario Draghi suggesting continued monetary support for the Eurozone also weighed on the currency.

"The likelihood that the ECB will repeat its dovish rhetoric during its Central Bank meeting in June is encouraging traders to enter selling positions on the Eurodollar after the pair reached new 2017 milestone highs above $1.12 last week.

"Despite economic data around Europe continuing to improve confidence that the economy has turned a corner, the market is swaying towards the belief that the ECB will repeat in June that the economy still requires ECB stimulus and this could result in the Eurodollar slipping further towards $1.10."

Across the Atlantic, meanwhile, the dollar was on the back foot against all of its main rivals, with the exception of the Canadian dollar, against which it gained 0.33% to CA$1.3497.

The greenback was 0.20% lower against the yen, the Swiss franc and the Australian dollar, trading at ¥111.05, CHF0.9757 and A$1.3416, respectively.