Tightening polls a week before the US elections have sent the pound to an almost two-week high, as investors reacted to the news Republican candidate Donald Trump could be closing the gap with his Democratic rival Hillary Clinton.
A Washington Post-ABC News tracking poll released on Tuesday showed Donald Trump with a one-point lead over Hillary Clinton nationally, marking the first time that the Republican has held a lead in that poll since May.
That poll is pushing investors away from the dollar, in turn sending sterling upwards.
Sterling has rallied to $1.23 against the dollar at 1pm.
This marks a welcomed boost for pound which became the worst performing major currency in October.
Sterling is still down about 17 per cent against the dollar since the UK voted to leave the EU in June.
“Not a lot is going from the sterling side of the equation - it’s about the dollar, it’s about the poll,” Neil Mellor, a London-based currency strategist at Bank of New York Mellon, told Bloomberg.
US election angst hit the City as the FTSE 100, Britain’s benchmark share index, shed 40 point or 0.6 per cent at the open on Wednesday – its lowest level since September 30.
Hussein Sayed, FXTM chief marketsaid markets are in the “early stage of panic” about next week’s election.
“Trump’s odds for winning the US elections increased after the FBI reopened its investigation into Hillary Clinton’s use of a private server and he will maximise his leverage on the case with less than a week remaining to the election date.“
“The post Brexit vote market reaction is still fresh in investors’ memory and no one wants to be caught on the wrong side of the trade, it will only take another one or two polls showing a Trump lead to boost markets anxiety and thus a steep sell off in equity markets and high beta currencies.”
