FX Focus: Pound slips back as Britain heads to the polls

The pound struggled for direction on Thursday (8 June), as Britons headed to the polls to elect the next Prime Minister.

Having hit a two-week high earlier in the session, sterling slipped back and by mid-afternoon was trading flat against the euro at €1.1513 and 0.35% lower against the dollar at $1.2913.

"Sterling was gripped by pre-election jitters on Thursday with prices dipping below $1.2950 as investors pondered over how the UK election exit poll results may play out this evening," said FXTM research analyst Lukman Otunuga.

"Although the final general election poll has offered the Conservatives a last-minute boost against Labour, the election outcome remains uncertain.

"With the uncertainty ahead of the general election leaving investors on edge, sterling could remain under pressure with short term bears targeting $1.2900."

Polling booths in the UK opened at 7am BST and will close at 10pm tonight in the snap election called back in April by Prime Minister Theresa May.

May is on course to increase her majority in the House of Commons with a final campaign poll giving the Tories a lead of seven points over Labour as the nation votes for the second General Election in two years.

The last poll conducted by YouGov on Wednesday evening put the Tories on 42% and Labour on 35%.

However, at the start of the campaign the Conservative had as much as a 24-point lead when the election was first called, in what has widely been seen as a faltering drive for votes by the Prime Minister.

"We've seen previously that these polls can be unreliable – in 2015 in favour of the Conservatives - but we've also seen the populist vote prevail in recent years as well," said Oanda senior market analyst and IBTimes UK columnist Craig Erlam.

"With polls being so varied, it seems in recent days that markets have largely shrugged them off and instead assumed that May will get her majority.

"The problem now is that with sterling trading at near nine-month highs against the dollar, having gradually rallied since the start of the month, it is vulnerable to a sharp decline if things don't go as planned."

Meanwhile, the euro edged lower after the European Central Bank (ECB) lifted its forecasts for economic growth in the Eurozone but kept interest rates on hold. The ECB now expects the Eurozone economy to grow 1.9% this year, up from the 1.8% figure forecast in March. Growth projection for next year and 2019 were lifted from 1.7% to 1.8% and from 1.6% to 1.7% respectively.

Fawad Razaqzada, market analyst, Forex.com said: "This key ECB meeting ended up being a bit of a damp squib.

"The central bank and its president Mario Draghi delivered contradictory statements about inflation and probably left many market participants feeling somewhat disappointed that there wasn't anything concrete announced."

Following Draghi's press conference, the euro was flat against the yen and 0.36% lower against the dollar, trading at $1.1216. The latter was on the front foot against the yen and the Swiss franc, gaining 0.35% and 0.26% respectively, to fetch ¥110.22 and CHF0.9676.

The greenback was flat against its Australian counterpart and slid 0.11% against the Canadian dollar to CAD$1.3494.

US investors will not turn their focus on former FBI Director James Comey's testimony before Congress at 3pm BST, which could trigger some significant political turmoil.

On Wednesday, Comey's testimony was released, in which he claimed that Donald Trump had pressured him to drop the investigation into the former national security advisor Michael Flynn.

The documents also revealed that Trump had demanded "loyalty" from Comey, something which the president denied when questioned by journalists last month.