(April 19 Reuters) Sterling hovered a cent below Tuesday's six-and-a-half month highs against the dollar on Wednesday, the jury still out on whether it can make more progress on the back of optimism around the shock calling of a June 8 parliamentary election.
The pound's almost 4-cent surge, half of it in U.S. trading time, in the previous session, cleared out a large portion of the record bearish bets against the currency that have dominated trading since the Brexit referendum last June.
The prospect of a stronger majority for prime minister Theresa May, who leads the opposition Labour Party by 20 clear points in opinion polls, has spurred hope that will lay the ground for a slower, more orderly departure from the European Union after 2019.
But traders remain cautious on backing more gains into a weekend liable to be dominated by the first round of French elections. UK retail sales numbers on Friday could also provide more evidence of sinking consumer demand and economic growth into the election.
"It isn't quite the one way street that a lot of people have painted over the last 20 hours," said Richard Benson, co-head of portfolio investment with currency fund Millennium Global in London.
"With a 20 percent lead off the starting blocs, I would have thought the risk is more that it will narrow than grow. A positive surprise from the French election would also presumably see a squeeze higher in the euro after the weekend.
After briefly gaining on the day, sterling traded 0.15 percent weaker compared to the U.S. close at $1.2818. It was also down 0.2 percent at 83.69 pence per euro.
(Reporting by Patrick Graham; Editing by Jamie McGeever)