Sterling Begins To Recover
UPDATE: Pound gains due to Obama Brexit input
Tuesday 26th April 2016 Sterling soared to a ten-week high against the dollar yesterday and has continued to do so today, while the cost of hedging against weakness fell sharply, as bets on Brexit eased after U.S. President Barack Obama voiced his support last week on for Britain staying in the European Union.
The pound's exchange rate has been at the mercy of any news affecting the chances of Britain voting to leave the EU since late last year. It has fallen over 8 percent since last November on a trade-weighted basis as investors have become increasingly jittery about the chances of Brexit. However data from betting website Betfair showed the chances of Britain staying in the EU surged to their highest since last September, with the implied probability of a Brexit falling to about 27 percent, down from 37 percent this time last week. That followed an intervention on the side of the "In" campaign by Obama, who said on Sunday that Britain might have to wait a decade for a free trade deal with the United States if it votes to leave the EU, following similar comments on Friday.
Sterling jumped almost 1 percent on Monday to as high as $1.4520, its strongest since Feb. 15 - five days before the June 23 referendum date was announced. The pound hit a six-week high of 1.2890 against the euro. Last week was sterling's strongest against the common currency since early March as odds swung in favour of the campaign to stay in the EU. Wednesday morning we have the UK GDP figures released. This is expected to be lower than expectations. This could weaken the Sterling against all currencies.