Sterling hits 7-week high on expectation Remain will win

Sterling hit a seven-week high against the dollar on Tuesday, getting a lift from recent opinion polls that have edged back in favour of the campaign for Britain to stay in the European Union and which has diminished appetite for safe-haven currencies. Sterling hit a seven-week high against the dollar on Tuesday,

Two opinion polls on Monday showed that the “Remain” camp has recovered some ground in Britain’s European Union referendum debate, but a third poll found those wanting to leave were ahead by a whisker. The implied probability of a “Remain” vote in Thursday’s referendum was at around 75 per cent having fallen to as low as 60 per cent last Thursday, according to odds from gaming website Betfair.

Sterling rose 0.4 per cent to $1.4747, its highest since early May. On Monday, it climbed 2.1 per cent against the dollar, its biggest one-day gain since late 2008, as investors and speculators cut bets against the pound.

“Some of the recent events have been favourable for Britain to remain in the EU, but it’s still too close to call,” said Manuel Oliveri, currency strategist at Credit Agricole. “We are advising our clients to go neutral into the vote, although we remain constructive. If “Remain” wins we expect sterling to rise to $1.55.”

George Soros, the hedge fund billionaire who earned fame by betting against the pound in 1992, said a vote to leave would trigger a bigger and more disruptive sterling devaluation than the fall on “Black Wednesday”. He said the pound would fall by at least 15 pe rcent, and possibly more than 20 per cent, to below $1.15, if Britain opted to leave.

The euro was flat against the pound at 77 pence, not far from Monday’s near three-week low of 76.925 pence. Against the dollar, the euro edged up 0.2 per cent to $1.1330, moving in sympathy with the pound. Traders expect the euro to be boosted against most major currencies like the dollar and the yen if Britain chooses to stay in the EU.

Traders will keep an eye on a ruling by Germany’s top court on the legality of an emergency ECB bond-buying scheme, although its not expected to have a major impact on the euro.

“That can either be due to the fact that nobody expects the German constitutional court to not completely share the European Court of Justice’s view -- which is unlikely as none of the experts expect this-- or that nobody expects today’s decision to have an effect on the ECB’s current monetary policy,” said Esther Reichelt, strategist at Commerzbank. The dollar index stood at 93.488, holding above a one-month low of 93.425 hit earlier this month, as the market awaited Federal Reserve Chair Janet Yellen’s testimony before the Senate Banking Committee at 1400 GMT. The dollar edged up 0.6 per cent to 104.55 yen .

Reuters