LONDON: Sterling edged up to a seven-month high against the dollar on Tuesday, cementing recent gains as traders shrugged off weak economic growth data and kept an eye on the final days of campaigning before Britain’s general election.
Investors have ramped up their bets in recent days that the governing Conservative Party would win a majority in the election on Thursday, although political pundits are far more cautious.
Sterling held most of those gains even though data showed Britain’s economy grew at its slowest annual pace in nearly seven years in October, just 0.7%.
“The latest batch of economic data from the UK provides a fairly negative view on the recent levels of activity with the main takeaway being a flat GDP reading for the month of October,” said David Cheetham, chief market analyst at online broker XTB.
Industrial output fell by 0.7% in the three months to October and the services sector grew by 0.2%, its weakest increase since June, the data showed.
“Sterling price action is all about the upcoming parliamentary election and real economic data should continue to play second fiddle,” ING analysts said in a note sent to clients.
The pound was up 0.3% at US$1.3169 and just below a fresh seven-month high of US$1.3190.
Against the euro the pound rose 0.1% to 84.18 pence, not far from a two-and-a-half-year high of 83.94 pence touched on Monday.
Polls mostly predict a Conservative Party majority – which many investors believe would lift some of the political uncertainty that has hampered the British currency.
However, some analysts still see the chance of a hung parliament in which no party gains an overall majority.
Prime Minister Boris Johnson’s Conservative Party has vowed to take Britain out of the European Union on Jan 31.
Cheetham at XTB noted that the biggest driver for the pound on Tuesday could come at 2200 GMT when a new YouGov poll is released.