Latest polls damage Sterling

Sterling slipped this morning, while the cost of hedging against sharp falls in the exchange rate over the next month rose to its highest in over seven years on worries that the campaign for Britain to leave the European Union was gaining the upper hand.

Two surveys by polling firm ICM on Tuesday showed British voters have moved towards vote for a Brexit at this month’s referendum. The “Out” campaign stood three points ahead in both surveys, one of which was conducted online and the other by telephone.

Sterling remains sensitive to any new polls that place a ‘Leave’ vote ahead by a considerable margin. We…expect the volatility in sterling/dollar to continue rising in the coming days, given that polls just a few days before the vote may have a bigger market impact than they did previously.

Most economists and strategists reckon a vote to leave the EU on June 23 would deal a blow to Britain’s economy and would send sterling tumbling, while a vote to stay would drive sterling sharply higher.

Worries about a Brexit drove the pound down 11 percent on a trade-weighted basis between mid-November and early April, when it hit a 2-1/2-year low. But it has recovered around half of that as investors price out chances of a rate cut that some were factoring in if Britain opted to leave.

Expectations among people in Britain for inflation over the coming year slipped in May following a slight decline in official inflation data, a survey showed yesterday.

The monthly Citi/YouGov survey found inflation expectations for the year ahead fell to 1.5 percent from 1.6 percent in April. Expectations for inflation over the next five to 10 years was steady at 2.8 percent.

Official data last month showed British inflation slipped in April for the first time since September last year, reflecting a drop in airfares after a March surge around the Easter holidays.

If you buy dollars regularly it could be beneficial to talk to a member of our team as soon as possible as the GBP/USD is expected to continuously drop off.

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