The pound fell against the dollar on Tuesday after several polls suggested that the Conservative party’s general election lead had narrowed.
A Kantar poll released on Tuesday suggested the Tory lead had shrunk from 18 points to just 11, while an ICM poll from late on Monday indicated that the gap between Boris Johnson’s party and Labour had fallen from 10 to 7 points over the previous week.
The pound was down by more than 0.3% against the dollar (GBPUSD=X) on Tuesday to about $1.285, largely because a hung parliament would throw the future direction of Brexit into question.
It was also down by almost 0.4% against the euro, to about €1.167 (GBPEUR=X).
The currency had climbed on Monday amid suggestions that Johnson’s party could win a majority of 80 seats in the House of Commons, paving the way for his Brexit deal to be passed ahead of the 31 January deadline.
“With just over two weeks to go until the big vote, it is important to remember that markets can see volatile swings on any political updates and so investors will be watching the polls very closely to judge the latest state of affairs,” said Russ Mould, investment director at AJ Bell, in a note.
The currency, which is extremely responsive to Brexit developments, is showing an “increasing sensitivity” to election matters, said Conor Campbell, a financial analyst at Spreadex.
The Labour party thus far has not eked out a consistent position on Brexit, and the absence of a decisive Conservative party majority could lead to many more months of uncertainty.
Johnson has pledged to “get Brexit done” if his party wins the election, but analysts fear that his party could lose its lead in the final weeks of the campaign.
The pound has borne the brunt of market anxiety about the UK’s decision to leave the European Union — but had its best month in over a decade in October after a no-deal Brexit was taken off the table.
But the currency is still down significantly since the June 2016 referendum, and has not been able to more than fleetingly broach the $1.30 mark.