Sterling slipped on Thursday as investors ditched riskier assets in favour of safe havens such as the yen, worrying that Britain will vote to leave the European Union in a referendum in two weeks’ time.
While it has recovered from lows hit earlier this year, up 3 percent on a trade-weighted basis in the past two months, sterling continues to be buffeted by concerns that Brexit would leave Britain short of the investment it needs to fund a huge trade and current account gap.
On Thursday it slipped 0.4 percent to $1.4453. Against a yen surging amid subdued risk appetite across markets, the pound fell over 1 percent towards an eight-week low.
“At the moment, the FX market is losing its risk appetite … and given that the Brexit risk is one of these big hurdles out there for the market and for risk appetite, in this environment sterling would do badly,” said Rabobank currency strategist Jane Foley.
“I think we’re going to have very jittery markets over the next couple of weeks in the run up to the vote.”
Against the euro, sterling inched down 0.2 percent to 78.715 pence.
Trade balance data
due at 0830 GMT will be watched by currency traders.
But political risk will remain the main driver for sterling up until the July 23 referendum on EU membership.
The latest betting odds on website Betfair show the implied probability of a British vote to stay in the European Union have risen to almost 76 percent on Thursday. That is up from an implied probability of around 72 percent of an “In” vote earlier this week.
Opinion pollsters have so far painted rather contradictory pictures of how Britons will vote.
“The pound should remain driven by Brexit-related uncertainty,” wrote Credit Agricole strategists.
“We stay of the view that the pound will continue to trade within this year’s trading range. While elevated short positioning should prevent the currency from depreciating more considerably,… uncertainty as when it comes to the possibility of a Brexit should keep demand for the currency low.”
Source; Reuters