Sterling, euro recover as
chance of Brexit seen falling
Send a link to a friend
[June 17, 2016]
By Patrick Graham
LONDON (Reuters) - Sterling rose half a
percent in early London trading on Friday and the euro added to
gains in the past 24 hours on expectations that the killing of a
pro-EU British lawmaker may alter the balance of opinion in
Britain's referendum on EU membership.
Speculation was rife among traders after the murder of Jo Cox on
Thursday that Prime Minister David Cameron might push back the vote
due to take place on June 23.
There has been no such signal from Downing Street, but either way
some traders think the murder will turn the tide of public opinion
after a series of polls showed the "Leave" campaign moving ahead.
Concerns Britain would send a shockwave through global financial
markets and European politics by voting to leave the 28-country bloc
have prompted a flood of money into traditional safe havens such as
the yen and the Swiss franc.
"For now the bounce is only really visible in sterling," BNP Paribas
strategist Michael Sneyd said.
"The biggest move this week has been the shift in Fed expectations,
which we have seen in surge in the yen against the dollar. What's
interesting is the euro has not reacted, which suggests there has
been an increase in risk on the euro itself."
By 1120 GMT, sterling was up 0.6 percent at $1.4276, almost 3 cents
above Thursday's lows. It also gained 0.2 percent to 78.85 pence per
euro. The single currency firmed a third of a percent to $1.1257
from a two-week low of $1.1131.
The cost of hedging against volatility in sterling and the euro over
the next week hit multi-year highs, however, reflecting the risk of
a sharp move either way for both next Thursday.
The yen also remained within sight of almost two-year highs of
103.55 yen hit against the dollar on Thursday.
"Past the date of the referendum, asset prices are likely to move
sharply, regardless of the outcome of the referendum," Goldman Sachs
strategists said in a note on Friday.
[to top of second column]
Wads of British Pound Sterling banknotes are stacked in piles at the
GSA Austria (Money Service Austria) company's headquarters in Vienna
July 22, 2013. REUTERS/Leonhard Foeger/File Photo
The U.S. bank said the Swiss franc would be the biggest gainer against both the
euro and sterling in the event of a vote to leave. The franc gained 0.4 percent
against the dollar compared to the market close in New York. It hit its highest
against the euro this year on Thursday.
Analysts from Credit Agricole closed some risk-averse bets in response to
Thursday's events and a minimal recovery in investors' appetite for risk
overnight, but they remained cautious.
"We believe it is premature to conclude that the risk of Brexit will abate from
here," they said in a note.
"Polls in coming days should offer an indication of whether voter sentiment has
shifted. We therefore remain fairly cautious on the outlook for sterling, the
European and the commodity G10 currencies."The dollar last stood at 104.34 yen.
(Editing by Janet Lawrence)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.