June 5, 2017 / 8:01 AM / 6 months ago

Sterling recovers from blow following London attack

* 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

LONDON, June 5 (Reuters) - Sterling recovered ground on Monday after diving half a cent against the dollar in early Asian deals as traders reacted to another militant attack over the weekend in London ahead of Britain’s national election this week.

Saturday’s attack - the third in England in three months - saw sterling slip from $1.2893 to $1.2851 at the start of Asian trading.

It had recovered to stand less than 0.2 percent lower at $1.2875 by 0743 GMT.

The pound was less than 0.1 percent higher at 87.51 pence per euro.

Sterling has wobbled over the past two weeks, with investors’ confidence that Prime Minister Theresa May would secure a landslide majority shaken by opinion polls predicting a wide range of outcomes for the June 8 snap election.

Polls have results ranging from a slim majority for May’s Conservative Party to a hung parliament - worrying investors who had bet a landslide win for May would translate into a stronger bargaining position in Britain’s exit talks with the European Union, which begin on June 19.

Besides awaiting further polls, investors were watching for a reading on the UK’s outsized services sector, with the Markit/CIPS services purchasing managers’ index due at 0830 GMT. A Reuters poll of economists predicts a reading of 55 for the index for May versus April’s 55.8.

“We expect only limited market impact, especially as the main focus remains on politics,” Credit Agricole strategists wrote in a note to clients.

“Regardless of this week’s outcome of UK elections, we believe the pound should prove a sell on rallies. This is especially true as investors’ focus will swiftly shift to actual Brexit negotiations later this month.” (Reporting by Ritvik Carvalho; Editing by Gareth Jones)

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