* Graphic: Sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
By Ritvik Carvalho
LONDON, June 7 Britain's pound traded within a
half-cent range against the dollar on Wednesday, staying near
seven-month highs as investors increasingly take the view that
Prime Minister Theresa May's party will win a majority in a
general election on Thursday.
Sterling gained as much as 4 percent after May called a snap
election seven weeks ago, as polls suggesting a landslide win
for her Conservative party would give the prime minister a
stronger hand in Britain's negotiations on leaving the European
Union. Those talks begin later this month.
But recent polls predicting outcomes ranging from a majority
for the Conservatives to a 'hung' parliament have seen the pound
slip from the $1.30 mark it hit last month. It has held on to
most of its gains, however, with most analysts attributing its
resilience to investors still being confident of a Conservative
"The consolidation is still continuing," said Martin Arnold,
currency strategist at ETF Securities.
"I think the market's still thinking there's going to be a
majority for the Conservatives and the election result
historically has generally been more tied to the leadership
preference rather than the actual polls."
Britain's Conservative Party is generally perceived by
investors to be business-friendly.
Sterling was 0.1 percent lower at $1.2895 by 0819 GMT.
Against the euro, it was 0.1 percent higher at 87.28 pence,
investors also awaiting the European Central Bank's policy
announcement on Thursday for clues on its stance towards
tapering its stimulus programme.
One-week sterling-dollar implied volatility, which measures
the cost of hedging against price swings in the currency pair,
was at 12.8 percent, near its highest levels since Jan. 17, when
May set out her Brexit strategy.
Despite keeping gains versus the dollar, sterling has fallen
2.5 percent in trade-weighted terms in less than four weeks
since polls first suggested a narrowing lead for the
U.S. positioning data shows speculative investors have
flipped back to betting more against the pound; many hedge funds
expect any recovery in sterling will be short-lived, regardless
of the election result.
"Large majorities are no guarantee that sterling will
sustain its gains, and with UK growth stalling, market
complacency over the start of Brexit negotiations and
positioning now broadly neutral, our bias would be to sell
sterling rallies," Bank of America currency strategist Kamal
Sharma wrote in a research note.
(Reporting by Ritvik Carvalho)