LONDON (Reuters) - Sterling briefly touched near seven-month highs against the euro on Thursday on a poll predicting a comfortable election victory for the ruling Conservatives, then slipped to end the day marginally lower.
British Prime Minister Boris Johnson is on course to win a majority of 68 in parliament, according to a model from pollsters YouGov that accurately predicted former prime minister Theresa May’s loss of her majority in a 2017 election.
The opinion poll pushed sterling to its highest level against the euro since May 6 at 85 pence , though it ended the day 0.2% weaker at 85.27 pence.
Versus the greenback, the pound rose to a one-week high of $1.2953, then slipped, ending 0.2% weaker on the day to $1.2907.
Sterling “will rally further if Wednesday’s poll from YouGov ... is confirmed on Dec. 12,” Stephen Gallo, currency strategist at BMO Capital Markets, said, referring to election day.
Though he noted that an increase in the pound “from here is rather limited, with risks during the Brexit transition now being considerably underpriced by the FX market.”
If Britain was to leave the European Union on Jan. 31, it would still need to negotiate a trade deal with the bloc during the transition period, due at the end of 2020. Analysts predict it would be very hard to agree on a deal in such a constrained time.
Hopes that a Johnson victory would end more than three years of uncertainty over Brexit have lifted the pound in recent weeks, despite persistent concerns that Britain could end up exiting the European Union without a trade deal.
The Conservatives could win 359 seats out of 650, up from 317 in the 2017 election and the best result for the party since Margaret Thatcher’s 1987 victory, according to YouGov’s model.
Following the poll, the likelihood of a Conservative majority rose to 67.5% from 63%, according to odds from betting agencies, while the probability of a hung parliament - in which no party has a majority - fell to 28% from 32%.
Reporting by Yoruk Bahceli; additional reporting by Robert Howard; Editing by Gareth Jones and Andrew Heavens