Sterling recovers from 3-week lows after new Brexit polls

Sterling bounced about half a per cent against the euro and dollar on Tuesday after a pair of polls gave a narrow lead to the “Remain” camp ahead of the June 23 referendum on Britain’s European Union membership.

The pound had sunk to a three-week low in trade-weighted terms on Monday after a pair of online surveys gave the “Leave” camp a 4-5 per cent lead.

Support for remaining in the EU, however, had a one-point lead in both an online YouGov survey published for The Times newspaper on Tuesday and an ORB telephone poll of those definite to vote conducted for The Daily Telegraph.

Dealers said a generally weaker tone to the dollar since shocking US jobs data on Friday has also helped.

“The two polls overnight have lent support to the pound early in today’s session,” said Craig Erlam, senior market analyst with currency brokers Oanda in London.

“With momentum, though, very much with the ‘Leave’ campaign, it would appear, at least from the recent polls, that there is a very real chance that the UK could vote out, which could play havoc with the markets.”

The cost of protection against swings in the currency over the next month hit its highest since late 2008 on Monday on concern that support for Britain leaving the European Union is growing. It inched higher still, to 22.2 per cent, on Tuesday.

Bookmakers have shortened their odds, with betting website Betfair putting the chances of a vote to leave at just over 30 per cent, little changed from Monday. Odds at the end of last week had implied a 27-per cent chance of Britain leaving the bloc.

Sterling was last up 0.6 per cent on the day at $1.4524 , having fallen as far as $1.4352 on Monday. It remains way above long-term lows around $1.38 hit as the Brexit campaign proper got underway in February.

The euro fell 0.5 per cent to 78.23 pence.

"The debate is getting long, loud and messy," said Tobias Davis, head of corporate treasury sales at Western Union in London. "But the pound has bounced off its recent sub-1.44 lows to trade comfortably above 1.45 this morning in light of a weaker dollar."

Reuters