UK: Sterling dives as polls tighten - Investec

Research Team at Investec, suggests that as the EU Referendum draws ever nearer and campaigning in full swing, it is becoming difficult to summarise the multitude of comments and events each week.

Key Quotes

“A strong leave camp performance by Justice Secretary Michael Gove seemingly overshadowed a stay camp performance by PM Cameron. Ex-premier John Major lambasted the leave campaign saying the man on the street will be affected most by a Brexit. This weekend an ITV opinion poll found 45% of Britons backed the leave campaign, compared with 41% remain. A TNS survey had a 43-41 vote in favour of the leave campaign. Polls continue to be a much closer run event than previous weeks and investors have returned to buying volatility.

The Pound has opened over a cent lower against the greenback after closing higher on Friday, above 1.45. A soft Non-Farm Payroll release saw investors sell US Dollars in currency markets and price out chances of a June hike in swap markets. In fact post-release a full rate hike was not even priced in by the end of 2016. It is worth remembering the Fed tends to look at the bigger data picture over several months and one jobs report will unlikely determine, on its own, the committee’s action. That said, in recent weeks some FOMC members have highlighted Brexit as the biggest current risk to the US economy, and with the June FOMC decision only one week before the vote, the Fed may wait until after the vote is complete.”