LONDON: Political worries continued to take centre-stage for sterling on Thursday, driving it lower as investors focused on a TV debate between Britain's party leaders later in the day.
Prime Minister David Cameron will face off against six political rivals in the first and only full televised debate ahead of unusually close national elections on May 7.
Neither Cameron's Conservatives nor Ed Miliband's Labour Party have a clear lead in the polls, while a possible referendum on Britain's EU membership, promised by the Conservatives, is adding to nervousness among investors.
Data released on Thursday showed growth in Britain's construction industry slowed in March, although confidence hit a nine-year high.
Sterling weakened to an intraday low of $1.4800 after the data from $1.4835 beforehand, leaving it down 0.1 percent against a broadly weaker dollar. The euro strengthened to 73.025 pence, up half a percent on the day.
"The data in the UK has been OK recently but all the attention is starting to be on the election," said Michael Sneyd, a currency strategist at BNP Paribas in London.
"Even if we were to get really strong upside surprises in UK data, I don't think it's going to be enough to move sterling ahead of early May."
Data showing Britain's manufacturing sector grew at the fastest rate in eight months in March gave the pound little respite on Wednesday.
The inclusion of seven parties in Thursday's debate, including anti-EU UKIP, is seen as a sign of just how fragmented Britain's political landscape has become.
Reflecting investor nervousness, the two-month implied volatility, which investors can buy to hedge against big swings in sterling's exchange rate over the election and in the three weeks after it, remained close to a 3-1/2-year high hit earlier in the week of 13.2 percent.
"Focus on politics (is) likely to continue to intensify into this evening's debate (and) could act as a drag on sterling given anticipated volatility," wrote Citi analysts in a research note.
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