November 13, 2019 / 4:21 PM / 25 days ago

UPDATE 1-Sterling steady as hopes of Conservative election win overshadow weak data

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Updates prices, adds fresh news and new comment)

By Olga Cotaga

LONDON, Nov 13 (Reuters) - The pound traded stable on Wednesday as weak economic data, which should hurt sterling, were more than offset by supportive political developments in Britain.

Average weekly earnings rose at a weaker pace in the three months to September in the UK.

On top of that, inflation fell in October to its lowest level in nearly three years, official data showed on Wednesday, adding to expectations that the Bank of England’s next move might be an interest rate cut.

Money markets are still pricing in a very low probability of BoE action next month.

The pound however continued to derive support from Monday’s news that in the Dec. 12 general election the Brexit Party will not contest seats the Conservative Party won at the last election in 2017. The move appeared to increase the chance that Boris Johnson would remain as prime minister to implement his deal to take Britain out of the European Union.

Sentiment was also buoyed by a YouGov poll released on Tuesday showing Johnson’s Conservatives had a 14-point lead over the opposition Labour Party. Another poll by Survation put the Conservatives six points ahead.

On Wednesday, Brexit Party leader Nigel Farage said he would stand down no more candidates beyond the 317 Conservative seats from which his party had already withdrawn.

Johnson’s office said he would promise later on Wednesday to get Britain out of its Brexit “rut” if he wins next month’s vote, saying the world is baffled by why the country is so “hesitant about its future”.

More than three years after voting to leave the EU, the country is still struggling to agree on what its relationship with Europe will be after the divorce; the lack of clarity has dried up domestic and foreign investment.

Sterling was last unchanged at $1.2841. Against the euro, the pound was flat at 85.75 pence.

“The pound is likely to remain well supported as long as the political news-flow pointing to a Tory majority continues,” said Derek Halpenny, head of research at MUFG, but he added, “The upside is limited.”

“There is a price to pay for these gains – a promised short transition period (after Brexit) that will weigh on sentiment, and with the economy set to weaken further as household spending weakens, pound gains will be contained.”

“If you start to see the Labour (party) making gains in the polls it will be interesting to see what the impact on sterling will be. I think sterling is priced too much for a Boris win,” said Justin Onuekwusi, fund manager at Legal & General Investment Management.

Britain missed its chance to host the first European factory of U.S. electric vehicle pioneer Tesla because of Brexit, Chief Executive Elon Musk said in remarks reported on Wednesday. (Reporting by Olga Cotaga Editing by Mark Heinrich)

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