The pound bounced back on Wednesday ahead of a British general election, even though a fresh poll predicted Prime Minister Boris Johnson's ruling Conservatives would win a much smaller majority than previously forecast.

Sterling initially fell sharply before recouping losses to show a gain of 0.3 percent against the dollar in late exchanges.

The greenback, meanwhile, pulled back after the Federal Reserve kept interest rates steady after rate cuts and suggested it was in no hurry to adjust rates further.

US stocks finished with modest gains.

But pre-election jitters weighed on the British capital's FTSE 100 index of blue-chip companies, which was essentially unchanged as caution prevailed.

A key poll released late Tuesday showed Johnson's lead over veteran socialist Jeremy Corbyn's Labour party ebbing away.

"The highly-regarded poll shows that the Conservative advantage has slipped. This is the poll that correctly predicted a hung parliament in 2017 -- and indicates that the scenario could repeat itself," said analyst Fiona Cincotta at trading firm City Index.

The YouGov opinion poll said the Tories would win Thursday's vote, with a majority of 28 seats, sharply down from the 68 forecast in a similar study at the end of November.

Sterling has surged in recent weeks -- sitting at an eight-month high against the greenback and a two-and-a-half-year peak against the euro -- on expectations Johnson would win a big enough majority to push through his Brexit deal.

However, the narrowing polls point to the possibility of another hung parliament -- which would lead to more uncertainty in Westminster and drag out the Britain-EU saga even longer.

"There's a bit of a waiting mode at the moment," Oanda analyst Craig Erlam told AFP.

"There's probably too much optimism in the market right now, a bit of complacency even."

Elsewhere, Asian markets mostly rose Wednesday but investors are growing nervous at the lack of news on China-US trade talks, with Washington yet to cancel tariffs on a swathe of Chinese goods planned for the weekend.

Negotiators are still trying to hammer out a mini agreement and the mood on trading floors remains upbeat, while most observers are confident the two sides will reach a deal, which has fed a global equities rally for weeks.

However, a fresh round of levies on $160 billion of Chinese exports to the United States is due to take effect in four days and there has been no clear word from the White House on a possible delay to that date.

The removal of tariffs is a key demand of Beijing in the talks.

In company news, shares in Saudi Aramco soared 10 percent on their trading debut on the Saudi stock exchange, boosting the energy titan's valuation to $1.88 trillion.

The pound dropped against the dollar and euro after the release of a new poll suggesting the Conservatives would not win as big a majority as a previous study projected
The pound dropped against the dollar and euro after the release of a new poll suggesting the Conservatives would not win as big a majority as a previous study projected AFP / Daniel SORABJI

But Chevron dropped 1.4 percent after it announced it will slash the value of its assets by as much as $11 billion due to weaker oil and natural gas prices.

Pound/dollar: UP at $1.3196 from $1.3156 at 2200 GMT

Euro/pound: UP at 84.33 pence from 84.31 pence

Euro/dollar: UP at $1.1129 from $1.1092

Dollar/yen: DOWN at 108.56 yen from 108.72 yen

New York - Dow: UP 0.1 percent at 27,911.30 (close)

New York - S&P 500: UP 0.3 percent at 3,141.63 (close)

New York - Nasdaq: UP 0.4 percent at 8,654.61 (close)

London - FTSE 100: FLAT at 7,216.25 (close)

Frankfurt - DAX 30: UP 0.6 percent at 13,146.74 (close)

Paris - CAC 40: UP 0.2 percent at 5,860.88 (close)

EURO STOXX 50: UP 0.4 percent at 3,687.45 (close)

Tokyo - Nikkei 225: DOWN 0.1 percent at 23,391.86 (close)

Hong Kong - Hang Seng: UP 0.8 percent at 26,645.43 (close)

Shanghai - Composite: UP 0.2 percent at 2,924.42 (close)

Brent North Sea crude: DOWN 1.0 percent at $63.72 per barrel

West Texas Intermediate: DOWN 0.8 percent at $58.76 per barrel