Sterling gains as Brexit uncertainty continues

22 June, 2016

Simon Eastman

Yesterday we saw the pound make further gains against most major currencies as the polls for Brexit showed a more even level for those on each side.

While we saw Jeremy Corbin and David Cameron make speeches to garner further support for the remain camp, investor George Soros, who made a mint on Black Wednesday all those years ago, stated Brexit would lead to even worse volatility for the UK and all those but a few would lose out in the long run if we left the EU. French companies took out full page adverts in our newspapers warning the UK that Brexit would cause issues for them keeping their business open here due to working sanctions – all in all a pretty miserable picture of doom and gloom as the vote looms tomorrow.

The euro weakened more than it possibly should against sterling, and buy over a cent to the dollar as Mario Draghi made a speech after lunch where he raised concerns over low inflation and hinted the ECB may use additional stimulus in needed to address the issue.

The only currency the pound dropped off against was the US dollar in the afternoon, as Janet Yellen made a speech to congress and confirmed they are looking at a slow but sustained program of interest rate rises. As Brexit is a key concern to the US this still leaves it open for a rate increase in the US in August or September as previously thought, depending on what the results here are of course on Friday. So the peak we had at lunchtime, faltered back as cable lost over a cent by close of trade, having hit a 6 week high.

So with the vote tomorrow, markets will still be led by the polls which flow from various agencies, meaning little notice is likely of the ecostats which are released. Today we have the ECB non monetary accounts meeting and another testimony from Janet Yellen – both key players so any comments from them as per yesterday, may affect the rates while investor sentiment does the rest.