The pound-dollar pair traded relatively flat as traders could remain cautious during the elections in the UK.
Sterling has appreciated since the beginning of the week as market sentiment remains positive, with expectations of a significant victory for Labour Party leader Keir Starmer, potentially ending 14 years of Conservative rule.
Polls suggest that Labour will secure a record number of seats. A decisive Labour win is seen as the base case, and confirmation of this outcome could further strengthen the British pound by eliminating any lingering risk premium.
However, a tail risk remains if the Conservatives perform better than expected, potentially leading to a hung parliament.
This scenario could introduce uncertainty and weaken the Sterling in the near term. The outcome of the elections could also affect treasury yields.
As a result, we could see more volatility in yields and the pound as election results are announced. Later, traders could turn their attention to new economic data in the coming weeks and the Bank of England meeting at the start of next month.
