Pound Gains for 6th Day Versus Euro as Brexit Seen Less Likelyby
Probability of U.K. leaving EU drops to 20%, poll shows
Traders look at referendum campaign as Obama visits U.K.
The pound strengthened for the sixth day against the euro, set for its longest winning streak in 10 months, as speculation eased that Britons will vote to leave the European Union in a June referendum.
Sterling touched the strongest level in a month against Europe’s shared currency, posting a second weekly gain, as polls suggested a vote in favor of the U.K. remaining in the EU in the June 23 referendum has taken a stronger lead. The probability of Britain voting to leave the bloc dropped to 20 percent, according to a poll released Thursday by the Number Cruncher Politics Referendum Forecast.
“The stay-in vote is picking up a little bit,” said Jennifer Hau, a foreign-exchange strategist at Credit Agricole SA’s corporate and investment-banking unit in London. “Although data coming in is important, general market risk sentiment seems to be the key driver for sterling at the moment.”
Risk reversals have showed a slightly less pessimistic outlook for sterling in the past few days, said Hau, referring to bets on a weaker pound using options. This indicates “abating Brexit fears in the market,” which is supporting Britain’s currency.
The pound appreciated 0.9 percent to 78.13 pence per euro as of 4:58 p.m. London time, after touching 77.95 pence per euro, the strongest level since March 21. A six-day gain would be the longest run since June 19. Sterling climbed 0.5 percent to $1.4389, having touched $1.4452, the highest since March 30.
U.S. President Barack Obama started an official visit to the U.K., having said Britain’s influence is enhanced by its membership of the EU. Obama is scheduled to hold a joint press conference with U.K. Prime Minister David Cameron in London later Friday.
Sterling is finding some respite even as data this week showed a bigger-than-forecast drop in U.K. retail sales and wage growth unexpectedly slowed.
The premium for three-month contracts hedging against sterling losses versus the dollar compared with those protecting against gains narrowed to 4.45 percentage point Friday, after reaching 4.79 on April 11, the highest level since Bloomberg began compiling the risk-reversals data in 2003. Despite the recent recovery, the pound is still down against all of its major peers in 2016.