By Lukanyo Mnyanda April 15 (Bloomberg) -- The pound rose against the euro after a poll showed the opposition Conservatives’ lead over the Labour Party widened, easing concern that next month’s elections will produce a government too weak to cut the budget deficit. Sterling strengthened for a second day against the 16- nation euro after the Daily Telegraph reported yesterday that a Crosby/Textor poll of voters in 100 “swing seats” gave the Conservatives 43 percent support, compared with 31 percent for Prime Minister Gordon Brown’s Labour Party. A report today showed consumer confidence unexpectedly declined in March. “The poll is probably what’s helping sterling stay up,” said Adam Cole, head of global currency strategy at Royal Bank of Canada in London. “It does give the Conservatives a much bigger lead.” The pound climbed 0.6 percent to 87.78 pence per euro as of 1:30 p.m. in London. It fell 0.2 percent to $1.5436, after reaching $1.5524, its strongest level since Feb. 23. There is a risk that “we unwind the gains we’ve had in the final weeks to the elections,” and the pound may weaken to 93 pence per euro before the May 6 vote, Cole said. Sterling will be worth 89 pence per euro by the end of June, according to the median of analyst predictions compiled by Bloomberg. Concern an incoming government may not have parliamentary support to cut the budget deficit, the largest in the Group of Seven nations, helped send the pound 4.7 percent lower against the dollar this year, less than the euro’s 5.5 percent decline. Opposition leader David Cameron has indicated he wants to cut spending at a faster pace than Labour. Contrasting Polls The Crosby/Textor survey contrasted with other polls showing neither of the two biggest U.K. parties has enough support to win a majority next month. A ComRes Ltd. poll for broadcaster ITV News and the Independent newspaper yesterday gave the Tories 35 percent support, with Labour at 29 percent. The Liberal Democrats got 21 percent. Should such a scenario play out, the Conservatives would be 40 seats short of a majority, the ComRes data showed. A YouGov poll for the Sun put the Conservatives ahead by 41 percent to 32 percent, probably not enough for an outright win. “A clear majority is good for sterling, otherwise fiscal consolidation would be even harder,” said Ulrich Leuchtmann, head of foreign-exchange strategy at Commerzbank AG in Frankfurt. “In comparison with the euro, the fiscal problems of the U.K. are much smaller than those of Greece, Portugal, Spain, and even Italy.” Deteriorating Sentiment Consumer confidence declined last month by the most since July 2008 amid concern about the economy, Nationwide Building Society said. The index of sentiment fell 9 points from February to 72, the customer-owned lender said in an e-mailed statement today. The reading was forecast to climb to 81, according to the median estimate of nine economists surveyed by Bloomberg. U.K. government bonds were little changed, with the 10-year yield falling less than 1 basis point to 4.02 percent. The two- year note yield was at 1.16 percent. The government sold 900 million pounds of inflation-linked bonds, securing bids equivalent to 1.66 times the amount on offer, the Debt Management Office said today. The government is scheduled to sell 187.3 billion pounds of gilts in fiscal 2011, down from a record 227.6 billion pounds in the past fiscal year. U.K. bonds made 0.7 percent in 2010, compared with a 2.7 percent return for German securities, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Gilts will be “vulnerable” to declines regardless of the outcome of the election, according to Citigroup Inc. “We do not see 10-year yields trading sustainably below 3.75 percent even if the Conservatives gain a significant majority,” Mark Schofield, head of interest-rate strategy in London, wrote in a note today. “Under our worst-case scenario, which is a hung parliament with Labour as the largest party, we see 10-year gilt yields climbing quickly toward 5 percent.”

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