The pound fell on Friday, driven lower by a poll showing Labour closing the gap on the Tories in the UK election race, and following Thursday's downward revision of first-quarter growth.
Sterling fell as much as 0.6 per cent against the dollar after a YouGov poll showed the lead for the Conservative Party had shrunk to just 5 percentage points – the narrowest since Theresa May became prime minister.
Gap narrows to 5 points
The poll, commissioned by the Times, showed the Conservatives to have the lead on 43%, with Labour climbing to 38%, the Liberal Democrats on 10% and Ukip with 4%.
Financial markets now appear less certain of a Conservative victory at the 8 June general election, and the biggest fear they face is of a hung parliament.
Hung parliament fears
"The inference is that markets are content with the likely prospect of a full five years of majority government with a bigger mandate than last time. That would mean less uncertainty," said Graham Smith at Fidelity.
He added, however: "There may be little if any scope for a relief rally after polling day if the possibility of another slim working majority has already been ruled out."
Losses for the pound were extended from the previous trading session, when official data showed that an already weak reading for first-quarter gross domestic product had been revised lower.
UK growth shrinks
Office for National statistics data showed that the UK economy had grown by 0.2% in the first quarter, lower than previous estimates of 0.3% growth, as consumer spending slowed.
While survey evidence for April and May have indicated that growth began to pick up again in the second quarter, many analysts believed the Bank of England's "wait and see" policy on monetary tightening was the prudent course.
"In our view, this GDP report reinforces the existing case for not responding to above-target inflation," said Sam Hill at Royal Bank of Canada.
Chris Williamson at IHS Markit said: "While the survey data for April offer a tentative suggestion that second quarter economic growth may be slightly stronger, there’s every possibility that growth could wane again later in the year unless inflationary pressures ease and wages start to show stronger growth."
By late morning on Friday, the pound was 0.6% lower against the dollar at $1.2864 and was down 0.7% versus the euro at €1.1463.