(Recasts with British pound, new throughout)
By Kate Duguid
NEW YORK, Oct 24 (Reuters) - The British pound fell against
the U.S. dollar on Thursday following Prime Minister Boris
Johnson's call for a national election.
Johnson said he was asking parliament to approve a national
election on Dec. 12 in an effort to break the political deadlock
over Brexit and ensure the UK leaves the European Union.
The added uncertainty brought on by an election may hurt the
pound GBP= in the near term. It was last down 0.47% at $1.285
and 1.43% lower this week. Having surged to a 5-1/2 month high
on Monday, sterling fell on Tuesday after British lawmakers
blocked Johnson's plan to push through a withdrawal agreement
and get the UK out of the EU on Oct. 31. "Is the election positive for GBP? I argue no. The campaign
will see polling swings, and investor inflows may slow whilst
they wait for the result. It's why we are long EUR/GBP," Nomura
analysts told clients.
With the Brexit end game more uncertain than traders thought
last week, the pound was set up for another rocky period.
Against the euro it dropped 0.26% to 86.38 pence per euro
EURGBP= .
However, the pound has risen nearly 5% in October as the
chances of a no-deal exit have been all but eliminated. It was
against that backdrop the pound retraced some of its initial
losses after Johnson announced his third attempt to force a snap
poll.
The dollar index benefited from the move in sterling, last
up 0.16% against a basket of rival currencies at 97.65 .DXY .
The euro was 0.21% lower at $1.111, though it had already
sunk against the dollar prior to Johnson's announcement. Despite
some optimism from Mario Draghi's final news conference as
president of the European Central Bank on Thursday, the euro
fell, pulled down by business surveys which point to stagnating
economic momentum in the euro zone. "We came into the morning thinking that there would be a bit
more optimism than usual from Draghi as it is his last meeting,
and we didn't think he would want to end his tenure on a
downbeat note," said Thierry Wizman, global interest rates and
currencies strategist at Macquarie Group.
"We detected some optimism towards the end of the press
conference which is why the euro rallied at around 9 a.m. ET.
And then it sold off. There was no news in the pipeline to help
it stay up."