Sterling rose almost 1% against the euro on Tuesday, to its highest in two months, after another opinion poll showing far-right French presidential candidate Marine Le Pen gaining ground hit the single currency.
The pound rose as high as 84.45 pence per euro, up 0.9% on the day, after the Elabe poll showed the lead of centrist Emmanuel Macron and conservative rival Francois Fillon over Le Pen falling to 18 and 12 points respectively.
The poll suggests anti-EU nationalist Le Pen may have more chance of springing a surprise if she makes it through to the second round of the elections in May.
And the closer a French populist shock to follow last year's U.S. presidential and Brexit votes becomes, the more the pound will begin to look like a safe haven, dealers say.
"The threat of politician Marine Le Pen winning the election ... has sparked jitters," Lukman Otunuga, an analyst with retail brokers FXTM in London said.
Sterling traded flat on the day against the dollar after a rollercoaster ride which earlier saw it threaten another fall below $1.24.
The pound has risen around 4 percent against the euro and currencies such as the Japanese yen since mid-January but has steadily drifted lower against the dollar in that time.
There was a measured message from Bank of England Governor Mark Carney and a group of policymakers testifying in parliament, who defended the bank's low interest rates but also noted rising inflation.
Ian McCafferty said that rising UK price growth was now closer to testing the bank's tolerance levels.
"On the one hand, they don't want to hike because growth appears to be slowing and we think growth slows further in 2018," said BNP Paribas currency strategist Sam Lynton-Brown.
"But on the other hand there is tolerance as they've said many times as to the extent to which they're willing to let inflation overshoot the target."
Analysts at Commerzbank saw sterling consolidating near its 55- and 100-day moving averages of $1.2415/07.
"We maintain a negative bias (on the pound) but patience is needed," Commerzbank's Karen Jones said, echoing the views of other major banks who have called for a further fall but said it may take more outright negative news on the economy and the shape of Brexit talks to trigger it.
Britain's upper house of parliament was holding a second day of debate over launching the Brexit process and various pressure points were showing elsewhere.
UK farming and environment minister Andrea Leadsom said farming policy was set for a major shake-up when the country leaves the EU because the current system has too much red tape and too few incentives to use new technology.
Another eurosceptic UK lawmaker also said Britain should block any attempt by Germany to shift the headquarters of the London Stock Exchange to Frankfurt after it merges with rival Deutsche Boerse. (Reuters)
Source: www.businessworld.ie
