Sterling under pressure after Tory dip in polls

The pound weakened against the U.S. dollar on Monday after polls showing that the Conservative Party’s lead has narrowed ahead of UK elections due to be held on June 8.

GBP/USD was down 0.51% to 1.2968 by 09.11 GMT, off Friday’s almost seven-month peak of 1.3039.

The drop in sterling came in the wake of polls showing that the Conservative Party’s lead narrowed to nine points, from around 20 points early in the campaign.

British Prime Minister Theresa May is facing a backlash over proposals for a shakeup in social care, including a proposal to make elderly people pay for care in their own home unless they have less than £100,000 in assets.

Many older voters, a key Tory demographic are unhappy at the idea of being forced to sell their home to pay for their healthcare

Other proposals, to end free school lunches for all infants and withdraw the winter fuel allowance for some pensioners, have also attracted criticism.

Investors had been confident that May would secure a strong win in the election, strengthening her hand in Brexit negotiations and allowing her to ignore lawmakers pushing for a hard Brexit.

Sterling was also lower against the euro, with EUR/GBP rising 0.19% to 0.8612.

Meanwhile, the dollar edged back from a six month trough against a basket of the other major currencies on Monday amid relief that that the political turmoil engulfing the Trump administration hasn’t intensified.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.29% to 97.28, easing off Friday’s low of 96.97, which was its deepest trough since November 9.

With U.S. President Donald Trump on a trip to the Middle East, the steady stream of revelations surrounding the FBI’s investigation into alleged Russian interference in November’s presidential election has receded.

The dollar came under renewed selling pressure on Friday following reports that a senior White House adviser is a person of interest in the probe into Russia’s role in the election.

The dollar has been hard hit by fears that the U.S. political system could become engulfed by crisis, preventing lawmakers from pushing through tax or spending reforms.