Sterling steadies after opinion poll pummeling

© Reuters. FILE PHOTO: A one pound coin lies on a Union Flag in this picture illustration© Reuters. FILE PHOTO: A one pound coin lies on a Union Flag in this picture illustration

By Patrick Graham

LONDON (Reuters) – Britain's pound was the only substantive mover among major currencies on Monday, recovering some ground after weekend polls showed Prime Minister Theresa May is set to win next week's elections even if the scale of victory is in question.

Sterling had its worst day since early February on Friday, and was down almost 2 cents last week as polls showed May's lead over the opposition Labour Party had shrunk from as much as 20 points last month to as low as 5 in one poll.

More surveys over the weekend confirmed the trend but also that May's Conservatives still lead solidly and should win – just potentially not by the landslide she had targeted when calling the election six weeks ago.

With London markets closed for a holiday, the pound inched up 0.2 percent in thin morning trade in Europe, trading at $ 1.2825 and 87.13 pence per euro () respectively. =>

The dollar, which also struggled last week in the face of receding expectations for a major boost for growth from the Trump administration, was steady at $ 1.1175 per euro and 111.33 yen. =>

“A lot of what we are seeing is the after effects of Friday's news and data releases,” said Thu Lan Nguyen, a currency strategist with Commerzbank (DE:) in Frankfurt.

“We have a little bit of dollar strength following better U.S. data and some hawkish comments from Federal Reserve officials. And we have a little bit of a pound recovery following the latest poll results from the UK.”

The , which tracks the U.S. currency against a basket of six major rivals, was broadly flat at 97.406 (), holding well above last week's nadir of 96.797, its lowest since Nov. 9.

San Francisco Federal Reserve President John Williams said in Singapore on Monday that medium-term trends in U.S. inflation remained “pretty favorable,” despite some recent soft consumer price data.

The U.S. economy was at or near the Federal Reserve's goals of full employment and stable prices, Williams said, adding that the U.S. central bank wanted to ensure markets stayed calm as the Fed slowly returned interest-rate policy to normal.

Data on Friday indicated the U.S. economy was modestly expanding, solidifying expectations for a rise in official interest rates next month and adding to the case for the Fed to begin paring its $ 4.5 trillion balance sheet. Gross domestic product grew at an annual 1.2 percent in the first quarter, faster than the 0.7 percent reported last month, though softening business investment and moderate consumer spending might impede an acceleration in the second quarter.

“Friday’s batch of US data is weighing on the euro as it strengthens the case a recent slowdown in US data may in fact have been transitory in nature ,” said LMAX Exchange analyst Joel Kruger.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=

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