·
Sterling weakens
against 15 of its 16 major counterparts
·
Gauge of one-month
volatility at highest level since 2009
The pound dropped after a new poll showed a jump in support for
the campaign to take Britain out of the European Union, spooking some
investors who had thought that the result was a foregone conclusion.
Sterling
fell against all but one of its 16 major peers as ICM opinion polls released
Tuesday by the Guardian showed a lead for the ‘Leave’ camp. A phone survey
showed 45 percent of respondents supported leaving, 42 percent for ‘Remain’ and
13 percent were undecided, in contrast to a previous survey which put the
pro-EU camp ahead. An online poll also put the Brexit camp ahead.
The question now is
whether the results should be seen as an outlier following a raft of polls
showing the ‘Remain’ camp in the lead, or whether it marks the start of a
broader shift toward the ‘Leave’ campaign. Whatever the outcome, the drop in
the pound shows just how sensitive investors are to shifts in public opinion,
highlighting the risk of more volatility with just over three weeks of the
campaign left to go.
“The market has moved to
reprice in higher risk of Brexit,” said Lee Hardman, a foreign-exchange
strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “But so far it is
only one poll’s result. If repeated in other polls it would result in a more
significant decline for the pound.”
The pound dropped 0.6
percent to $1.4552 as of 4:29 p.m. London time, the biggest drop since May 20. It
weakened 0.5 percent to 76.48 pence per euro. A gauge of the pound’s one-month
volatility versus the dollar climbed 18.38 percent, the highest since 2009.
Rally Halted
The ICM survey is the
latest in a series of boosts for the ‘Leave’ campaign, halting a recovery in
sterling in its tracks. The U.K. currency was the best performing Group-of-10
currency in the past two weeks as investors took heart from polls showing a
clear lead for the ‘Remain’ campaign. That rally was sustained even as
subsequent surveys indicated the gap was closing.
For a table of recent
U.K. referendum polls.
The findings of the ICM
phone survey are “interesting and unexpected,” Anthony Wells, the YouGov Plc
research director who runs the U.K. Polling Report website, said by phone. It’s
“very out of line in terms of other telephone polls,” which have been showing
leads of about 8-10 points for ‘Remain.’
“Suddenly showing ‘Leave’
ahead raises all sorts of questions,” Wells said. He highlighted two caveats:
Firstly, it’s only one poll, raising the question of whether it will actually
be echoed by other telephone surveys; and secondly it was conducted over a
bank-holiday weekend, when it may be harder to reach respondents if they’re
away for short vacation breaks.
Risks Increasing:
An ORB poll for the Daily
Telegraph newspaper this week showed 51 percent of definite voters surveyed
supported remaining in the bloc, and 46 percent wanted to leave, a narrower
lead for the remain camp than in ORB’s previous poll. Bookmaker William Hill
Plc said 85 percent of all EU referendum bets taken over Monday’s public
holiday in the U.K. were in favor of Britain exiting the bloc.
The ICM poll was
conducted after a week in which in-fighting within the Conservative Party over
the EU referendum worsened and net migration into the U.K. rose to close to a
record, adding fuel to the “Leave” camp’s case. Parliament’s Treasury Committee
accused both sides on Friday of making “bogus claims” about the cases for
staying in or leaving.
“Overnight and over the
weekend it seems to me that the news was rather pro-Brexit, i.e.
pound-negative,” Esther Reichelt, a Frankfurt-based currency strategist at
Commerzbank AG, said before the ICM survey was released. “Recent polls are much
closer, and I simply don’t think that it is warranted to be too sure about the
expected outcome of the referendum.”
Source: bloomberg.com
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