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Europe, Forex

Sterling holds near 30-month lows as Johnson’s majority shrinks

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Ritvik Carvalho

LONDON, Aug 2 (Reuters) – Sterling held close to 30-month lows against the dollar on Friday as a shrinking of Britain’s ruling Conversative Party’s majority in parliament added to worries over domestic politics three months before Britain is due to exit the European Union.

Britain’s pro-European Union Liberal Democrats won a parliamentary seat from the governing Conservatives, a blow to Prime Minister Boris Johnson in his first electoral test since taking office.

The loss reduces Johnson’s working majority in parliament to just one ahead of an expected showdown with lawmakers over his plan to take Britain out of the European Union on Oct. 31 without an exit agreement if necessary.

“For those that think that general election risk, in one form or another, is there for the pound in the autumn, then this marginally adds to that key story,” said Simon Derrick, head of currency research at Bank of New York Mellon.

“I don’t think it’s a particular surprise that the pound is under pressure again today.”

In early deals in London, sterling was flat against the dollar at $1.2128, not far from a 30-month low of $1.2080 hit on Thursday.

It was lower against a broadly stronger euro, down 0.1% at 91.50 pence.

Sterling has been pressured by a stronger dollar, renewed worries about a no-deal Brexit and reduced Bank of England forecasts for British economic growth.

The currency has shed more than 4% of its value in July, its worst month since October 2016, following new Prime Minister Boris Johnson’s vow to leave the European Union on Oct. 31 whether or not a transition deal can be agreed with Brussels.

BoE Governor Mark Carney said on Friday that some major industries could become unviable if Britain leaves the European Union without striking a deal with the bloc, adding that this was now a real prospect.

Activity in Britain’s construction industry shrank for a third month in a row in July as Brexit worries hit building projects, amid concerns that the slowdown could soon spill over into other areas of the economy, a survey showed.

The IHS Markit/CIPS construction Purchasing Managers’ Index (PMI) rose to 45.3, a less severe contraction than June’s 43.1 -which was the weakest reading in more than 10 years – but still well below the 50 level at which growth begins.

(Reporting by Ritvik Carvalho; Editing by Alison Williams)

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