Pressure of Brexit hurts Sterling
- Posted by Shyam Gokani in Bank of England, Brexit, Currency, Dollar, Economy, EUR, GBP, Mark Carney, Sterling, UK
- May 31, 2016
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Sterling eased on Tuesday, hurt by month-end selling and after a poll showed support for those who want to stay in European Union dropping, adding to growing uncertainty about next month’s referendum.
An ORB poll for the Daily Telegraph showed support for Britain to stay in the European Union was at 51 percent, five points ahead of the leave camp but down from a 13-point lead a week ago.
The latest poll came after a series of surveys last week pointed to the “Remain” camp opening up a lead over those favouring Brexit, lifting the pound to a three and a half-month high against the euro and a three-week high against the dollar.
The dollar was on track for its best monthly performance against a basket of currencies in six months buoyed by expectations that the Federal Reserve will raise interest rates in the near term. Those expectations got a boost from Fed Chair Janet Yellen’s comments on Friday where she suggested that rates could be raised in coming months.
Many in the market are not convinced that the Fed will raise interest rates in June given the uncertainty from the British referendum. Fed officials have flagged it as a risk factor with a potential exit likely to have an impact on global growth and trade.
Worries about 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 since recovered around half of that as investors have priced out chances of an interest rate cut that some were factoring in if Britain opted to leave.
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