Pound Doublethink Enters Brexit Debate as Bad News Seen as Goodby
Sterling rises even as data show house-price growth is slowing
Opinion poll shows lead for those wanting to remain in EU
Bad news may actually turn out to be good for the pound as the referendum on the U.K’s European Union membership approaches.
That’s the view of Steven Barrow, head of Group-of-10 research at Standard Bank Group Ltd., who says weak economic data may provide a note of caution about the potential perils of a Brexit. This, he argues, would make a vote to remain more likely, stemming the losses that have made sterling the worst-performing major currency in 2016.
Evidence for his thesis emerged on Thursday, when the pound rallied even as an industry report showed U.K. house-price growth softened in April. That followed data a day earlier showing the economy expanded at a slower pace in the first quarter, which “remain” campaigners seized upon as evidence that the June 23 vote is causing uncertainty and costing the nation investment.
“Disappointing data partly reflects concerns about the economic consequences should the U.K. choose to leave the EU,” London-based Barrow wrote in a client note. “But these same fears are giving a lift to the ‘remain’ side in the opinion polls, and it is this that’s lifting the pound.”
Currency trades recommended by Barrow have registered a total profit of 19.4 percent in 2016, according to a client note published April 28.
Sterling climbed as much as 0.5 percent to $1.4618, approaching the highest level since early February, and was up 0.3 percent at $1.4580 as of 4:28 p.m. London time. It strengthened 0.3 percent to 77.63 pence per euro, a day after an eight-day winning streak was halted.
The pound has been recovering amid speculation markets had over-estimated the prospect of Britain leaving the world’s largest single market. A phone poll published Wednesday indicated that 45 percent of people would vote to remain in the EU, with 38 percent wanting to quit.