20 May

Sterling soars after Brexit poll gives 'In' strong lead

Sterling hit a three-month high against a trade-weighted basket of currencies on Wednesday, after a poll published just over a month before Britain's referendum on European Union membership gave the "In" camp an 18-point lead.

The Ipsos-Mori poll, commissioned by London's Evening Standard newspaper, found 55 percent of those surveyed supported staying in the EU, while just 37 percent wanted to leave. Earlier in the day, a YouGov poll had handed the "In" camp a four-point lead.

According to betting website Betfair, the implied probability of a British vote to stay in the EU in the referendum on June 23 rose to 76 percent after the poll, up from 73 percent beforehand.

Sterling strengthened to a ten-week high of 77.20 pence per euro, leaving it up almost 1.5 percent on the day. That helped sterling reach 87 against the Bank of England's trade-weighted basket of currencies, its strongest since Feb. 18.

"Sterling is catching a solid bid on the latest surprise poll indicating a strong move in favour of the "In" camp," said Mizuho's head of hedge fund FX sales, Neil Jones. "The market I suggest is heavily hedged, running with short sterling exposure, and will likely turn buying. I sense there is further upside."

Short-term British interest rate futures showed investors winding back their expectations of an interest rate cut after the referendum. Though the Bank of England has said its next move is most likely to be a rate rise, markets reckon that a vote to leave could lead to a cut in rates in an effort to boost the economy.

Having earlier traded as low as $1.4403 (0.9869 pounds), sterling also strengthened to a two-week high of $1.4600, leaving it up 0.9 percent on the day.

Worries about a possible Brexit have weighed on the pound since late last year, driving an 8 percent fall in the past six months on a trade-weighted basis. But since hitting a 2-1/2-year low last month, sterling has recovered by almost 4 percent.

Eikon readers can click cpurl://apps.cp./cms/?pageId=brexit for the latest news and analysis on the EU referendum.

Earlier, mixed data showing the employment rate in Britain at a record high but earnings excluding bonuses growing more slowly than expected had nudged the pound downwards.

"I didn't read the data as overwhelmingly positive. There wasn't a lot of upside - I'm not convinced the jobless rate can fall that much further, so we're probably pretty close to full employment," said BMO Capital Markets currency strategist Stephen Gallo.

"I think weaker aspects of the data carry a bit more weight now in the run-up to referendum," he added.

(Editing by Toby Chopra)

Read this article from Reuters here.

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