Sterling jumps as Brexit vote risk drops

Sterling jumped yesterday amid evidence the campaign to keep Britain inside the EU is extending its lead.

Sterling climbed the most this year against the euro, touching a more than two-month high, and rallied against the dollar as an opinion poll by the Evening Standard newspaper and Ipsos Mori put the Remain camp’s lead at 18 percentage points.

That follows an ORB/ Telegraph survey earlier this week showing 55% of respondents in favour of staying in the EU against 40% wanting to leave.

Britain’s currency has acted as a barometer of sentiment in the run-up to the June 23 referendum, sliding to a seven-year low versus the dollar about a week after the date of the vote was announced in February.

It’s now gaining as surveys support optimism that a Brexit can be avoided. The government and Bank of England have said exiting the EU will hurt the economy.

“Market participants are trading on the headlines and seeing the Remain camp ahead and therefore buying the pound,” said Thu Lan Nguyen, a currency strategist at Commerzbank in Frankfurt.

Other surveys have also shown the pro-Europeans seizing the advantage. A poll by YouGov and The Times on Wednesday put the pro-EU camp at 44% against 40% for those favouring quitting the world’s largest single market.

The pound climbed 1.4% to 77.13p against the euro, touching the strongest level since March 10.

It also rose the most in two months against the dollar, advancing 1% to $1.4614 and reversing a drop of up to 0.4%.

The UK currency slipped earlier as the UK’s jobs market showed signs of cooling.

Coming after a report on Tuesday that showed an unexpected drop in the inflation rate, slowing wage growth underscored how the economy is struggling as the EU vote approaches.

“If we vote for leave, it will be a pretty precipitous decline of sterling,” Allianz Global Investors Global chief investment officer Andreas Utermann said.

“The negative implications of an out vote could be very serious,” he said. 

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