Election optimism keeps sterling strong against dollar


UPDATE 1-Election optimism keeps sterling strong against dollar

* Graphic: Sterling and gilt yields http://bit.ly/2dgAXn1
    * Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
    * Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

 (Updates prices, adds quotes)
    By Ritvik Carvalho and Jemima KellyLONDON, April 20 (Reuters) - Sterling rose against a broadly
weaker dollar on Thursday, with  polls showing British Prime
Minister Theresa May on course to win a landslide in June's snap
election cementing the view that she will get a stronger mandate
for two years of Brexit talks.
    The pound surged almost four full cents to its highest level
against the dollar since early October on Tuesday after May's
surprise calling of an early general election for June 8.
    After easing off a little on Wednesday, it was back up half
a percent on Thursday at around $1.2835 <GBP=D3> by 1500 GMT,
less than a cent away from Tuesday's high of $1.2908.
    Investors appear to be judging that a stronger mandate for
May in parliament would potentially give her more chance of
making the major compromises with the European Union necessary
to smooth Britain's exit from the bloc and cap any damage to the
UK economy.
    "An increased majority for the Conservative party in the
upcoming election would provide the PM with a clear mandate at
the start of the Brexit negotiations, as well as minimising
political uncertainty," wrote BNY Mellon strategists in a note
to clients.
    May's Conservatives had 48 percent of the vote in a YouGov
poll for The Times on Wednesday, compared with 24 percent for
the opposition Labour Party, suggesting a landslide victory
under Britain's first past the post electoral system.
    The pound was flat at 83.84 pence per euro <EURGBP=D3>,
having hit 83.145 pence - its strongest since December - on
    That the pound has not pushed on more strongly since Tuesday
relates to the doubts over the Brexit process and other parts of
the election fallout.
    "Consolidation will be the order of the day now, because I
think there's a realisation that there's both upside and
downside risk on the table," said ING currency strategist Viraj
    "The positive case from the general election, potentially
minimises the risk of a cliff-edge Brexit," he added. Markets
see a hard Brexit as a large negative.
    Scotland's First Minister Nicola Sturgeon said on Wednesday
success for her Scottish National Party on June 8 would make it
impossible for May to stop a new referendum on Scottish
independence. [nL8N1HR2T2]
    Victory for May will also further weaken any opposition from
outside her party to the clean break with Europe she has
outlined, likely including Britain's exclusion from the
continent's single market.
    The EU's foreign policy chief on Thursday said Britain will
lose more from the European Union from its decision to leave the
bloc, adding talks with London were expected to be difficult.

 (Editing by Janet Lawrence)
 ((Ritvik.Carvalho@thomsonreuters.com; +44 2075429406; Reuters
Messaging: ritvik.carvalho.thomsonreuters@reuters.net))


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