Sterling holds below $1.29 as traders consider UK election risks

Sterling held beneath $1.29 on Wednesday after British Prime Minister Boris Johnson won parliamentary approval to hold a general election in December.

The pound was steady against the euro, at 86.33 pence and little changed against the dollar at $1.2876, as the market assessed risks associated with the election, which will be held on Dec. 12. "Johnson has cross-party support and (the opposition) Labour Party has lost a fair lot of the credibility it had in the 2017 election," Derek Halpenny, European head of global markets research at MUFG, said.

"So that's reflected in the stability in sterling - markets believe the Conservative party will hold on to power and have a Brexit deal agreed with the EU." Just two days before the third Brexit deadline of Oct. 31 would be missed despite Johnson's "do or die" promise to deliver by that date, his bid to hold an election before the year-end was approved by 438 to 20 votes in the House of Commons.

The pound has rallied almost 5% so far in October, boosted in the week leading up to a new Brexit deal being reached at an EU summit. Johnson pushed for the election in response to being unable to get his deal through parliament. "The pound will move on any move in opinion polls between now and the election. Whether we get a hung parliament or a (Labour leader Jeremy) Corbyn majority or a Tory (Conservative) majority is not clear," said Michael Hewson, chief market strategist at CMC Markets.

"(The) the pound is likely to trade $1.25 and $1.30 between now and then but it will be a bumpy ride," he said.

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