4 Min Read
* Sterling trades near 2-week high before UK election
* Polls suggest PM May's Conservatives will win majority
* Euro steady ahead of ECB policy announcement (Updates prices, adds comment)
By Masayuki Kitano
SINGAPORE, June 8 (Reuters) - Sterling traded near a two-week high on Thursday, supported by expectations that Prime Minister Theresa May's party will win a majority in Britain's general election, while the euro held steady ahead of a European Central Bank policy announcement.
The pound held steady at $1.2956, trading near Wednesday's peak of $1.2970, its highest level since May 25.
Opinion polls showed on Wednesday that May is on course to increase her majority in parliament in the election, suggesting her gamble to call the vote to strengthen her position in Brexit negotiations will pay off.
"Markets appear to be pricing in a Conservative Party majority victory," said Jasslyn Yeo, market strategist for J.P.Morgan Asset Management.
If the Conservative Party ends up gaining a decisive majority of more than 50 seats, that would probably be seen as a positive outcome for sterling, Yeo said.
"However, we still see much uncertainty surrounding the UK election, where a higher turnout vote of young people could potentially turn the tables on investors," she added.
The pound gained as much as 4 percent after May called a snap election seven weeks ago, as polls suggested a landslide win for her Conservative Party would strengthen the Prime Minister's position when Brexit negotiations open later this month .
But recent polls predicting outcomes ranging from a majority for the Conservatives to a 'hung' parliament have seen sterling slip from the $1.30 mark it hit last month.
The euro held steady at $1.1254, with the market's focus on the ECB's monetary policy announcement due later on Thursday. The euro had reached a high of $1.1285 earlier in June, its highest level in nearly seven months.
The ECB is widely expected to keep policy unchanged on Thursday, including its 2.3 trillion euro ($2.59 trillion) bond-buying programme.
The euro's medium-term view looks positive, supported by prospects for the ECB to start heading towards normalising its monetary policy in coming months, said Peter Dragicevich, G10 FX strategist for Nomura in Singapore.
"It's more for us a story of positive euro, not just against the dollar but pretty much against all currencies...even against the commodity bloc," he said.
The ECB will probably announce a tapering of its asset purchases in September and actually begin tapering in January next year, Dragicevich added.
Investors will closely monitor U.S. Senate testimony by former FBI Director James Comey later on Thursday. Comey was abruptly fired by President Donald Trump in May.
Investors are worried his testimony could dampen already flagging momentum for Trump's agenda of rolling back regulation and overhauling the tax code.
In written testimony released on Wednesday, Comey said that Trump asked him to drop an investigation of former National Security Adviser Michael Flynn as part of a probe into Russia's alleged meddling in the 2016 presidential election.
The dollar gained 0.1 percent to 109.92 yen, edging up from Wednesday's low of 109.115 yen, its weakest level since April 21.
There was little market reaction to reports North Korea fired what appeared to be several land-to-ship missiles off its east coast early on Thursday.
Reporting by Masayuki Kitano; Editing by Shri Navaratnam