Pound fluctuates as polls check optimism on EU vote

Pound traders are getting a reality check as the latest survey signals the outcome of the UK’s referendum on whether to quit the EU is still too close to call.

Sterling erased a gain versus the dollar made earlier yesterday, retreating from its strongest level since before the vote date was set in February.

The latest setback came on with an IG/Survation poll putting the ‘Remain’ vote at 45% and ‘Leave’ with 44%.

That undercut some of the optimism the ‘Remain’ campaign was set for a comfortable victory and would avert a Brexit that prime minister David Cameron said would weaken the economy.

With the vote just two days away, sterling has whipsawed as traders contemplate the consequences of a decision to leave the world’s biggest trading bloc.

Fed chair Janet Yellen said a vote to leave could lead to a period of market volatility that may negatively affect the US economy, in response to questions from the senate banking committee.

Some investors are staying on the sidelines ahead of the vote, which is reducing liquidity and exaggerating price moves, according to Valentin Marinov, head of Group-of-10 foreign-exchange strategy at Credit Agricole’s corporate and investment-banking unit in London.

“For many investors, the Brexit vote is still a binary event that can go either way, and from that point of view what we are seeing now” is also “driven by very poor liquidity,” Mr Marinov said.

“Poor liquidity is accentuating the market moves.”

The pound shifted between gains and losses yesterday a day after a YouGov poll for The Times showed the pro-EU side leading by two percentage points, while a survey by ORB for the Daily Telegraph had ‘Remain’ at 53% and ‘Leave’ at 46% among those certain to vote.

The ORB poll had added to momentum suggesting the UK was moving toward staying.

Oddschecker puts the chances of a vote to maintain the status quo at 80%.

The pound fell 0.2% to $1.4663 yesterday evening, and earlier reached the highest level since January 4.

The currency gained 3.5% in the previous two days, the biggest back-to-back rise in over seven years. Sterling strengthened 0.2% to 76.82p per euro.