Sterling at six-week highs

The pound climbed to its highest levels in six weeks on Tuesday against the backdrop of broad-based dollar weakness and after a new poll showed the ruling Conservative Party widening its lead before next week's election.

Prime Minister Boris Johnson's Conservatives led the main opposition Labour party by 12 points, a survey by Kantar showed on Tuesday, before a parliamentary election on Dec. 12.

Analysts said the news bought some relief to currency markets, after recent polls pointed to an increased chance of a hung parliament, where no one party has an absolute majority.

"The fresh poll result is pushing the pound higher with the dollar's weakness also playing a part," said Lee Hardman, a currency strategist at MUFG in London.

Against the dollar, the pound rose as much as 0.5% to $1.3010, its highest level in six weeks and within a whisker of reaching its highest since May.

Sterling meanwhile gained 0.4% versus the euro to 85.13 pence.

Sterling has gained more than 6% from a Sept. 3 low as markets cut the risks of a no-deal Brexit.

But gains have stalled in the past month as election uncertainty has risen, including the prospect of victory for Labour, which has set out plans for tax increases for the wealthy and some nationalisations.

While Johnson wants to implement an exit deal he has already agreed with Brussels and leave the European Union in January, Labour is promising to negotiate a new exit deal and put it to the public at a second referendum next year, another potential source of uncertainty.

"Over the last week or two there has been a modest increase of short positions, so a bit of good news means a bigger move in the currency," said Jane Foley, senior currency strategist at Rabobank.

"The driver today is the latest opinion polls but in the last two weeks, there was a feeling of nervousness that Labour could narrow the Conservatives' poll lead."

Data showing the IHS Market November construction purchasing managers' index, a gauge of business activity, rose to 45.3 in November from 44.2 in October had little immediate market impact. Still, analysts said economic data could take on a more important role of for the sterling outlook if Brexit uncertainty fades after the election.