YouGov modeling comes up with a hung parliament after next week’s ballot.
The U.S. dollar weakened against its major rivals on Wednesday, while the pound was volatile following conflicting reports about the support for U.K. Prime Minister Theresa May’s Conservative Party in the June 8 general election.
The U.S. dollar index DXY, +0.19% which measures the currency against a half-dozen rivals, fell 0.3%, extending its recent weakness. The index is on track for a weak month, having lost 2.1% thus far in May. The WSJ Dollar BUXX, +0.00% which looks at the buck against a wider basket of other currencies, fell 0.2%.
The pound GBPUSD, +0.0000% swung between sharp losses and break-even trade after an estimate from a polling company indicated the Tories could lose its parliamentary majority in the vote next week.
“The reason the snap election was called was so that May could consolidate her power, giving her a stronger negotiating stance with Brexit. If she can’t do that, then the U.K. may be hampered in the negotiations somewhat, which would be a near-term negative for the pound,” said John Doyle, director of markets at Tempus Inc. “Because of that, having the pound regain some ground today is a bit of a head scratcher.”
The pound slumped to an intraday low of $1.2770—the lowest since mid-April—before rebounding to $1.2887. It fetched $1.2860 late Tuesday in New York.
YouGov research reported by The Times showed the Conservatives might lose 20 seats in parliament, with opposition Labour Party gaining 28. May’s party needs 326 to govern, therefore the loss of those seats would result in what is termed a “hung parliament.”
A few weeks ago, the Tories stood to increase their majority in a landslide. The pound was pushed above $1.30 on hopes a bigger Conservative majority would strengthen May’s negotiating power in the coming Brexit negotiations with Brussels, as the U.K. looks to establish fresh trade ties after its vote a year ago to exit from the European Union, dubbed Brexit.
The YouGov modeling has created “uncertainty the market doesn’t like,” said Neil Wilson, senior market analyst at ETX Capital.
“A hung parliament is the nightmare scenario for May. It would constitute a massive personal failure and undoubtedly make for great domestic political uncertainty at the worst possible moment for Britain,” he said in a note.
However, later on Wednesday sterling jumped to as high as $1.2865 after an opinion poll from Panase gave the Conservatives a 15-point lead over Labour.
Against the euro GBPEUR, +0.2713% the pound fell to €1.1474 from €1.1496, and against the GBPJPY, -0.17% it slid to ¥142.57, from ¥142.54
Opinion: May will win the U.K. general election—and catapult stocks and the pound
Elsewhere, the dollar inched up against the yen USDJPY, -0.16% to ¥110.62 from ¥110.84 late Tuesday.
“It sounds silly, but the yen has been used as a bet against risk whenever [President Donald] Trump tweets. The move today is just going on risk,” Doyle said.
Overnight, Trump tweeted the cryptic remark “Despite the negative press covfefe,” to much confusion.
The euro EURUSD, -0.3048% rose to $1.1231 from $1.1187 after data showed inflation fell more than forecast in May, but unemployment was stronger than expected in April.
The shared currency has strengthened recently as the dollar has weakened on worries that President Trump may have trouble pushing through policies aimed at stimulating U.S. economic growth.
In the latest economic data, pending home sales fell 1.3% in April, worse than expected. Meanwhile, the Fed’s Beige Book, an anecdotal survey of economic conditions at the Fed’s districts, suggested that the U.S. economy expanded at “modest to moderate” pace through late May.