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Sydney - The pound approached a five-month high against the dollar as bookmakers’ odds indicated a growing probability Britons will vote to remain in the European Union (EU).
A gauge of sterling is heading for its best week for more than six years on signs of dwindling support for Brexit following last week’s murder of UK member of parliament Jo Cox, who backed staying in the EU.
An index of betting odds compiled by Oddschecker put the probability of a vote to remain at 79%, up from from 63% on June 14, even as differences in polling results for the respective campaigns show the outcome of Thursday’s vote isn’t yet a foregone conclusion.
After Cox’s murder last week “a fair bit of repricing has occurred in the pound on the back of the shift in polls that were earlier clearly favoring ‘Leave,’” said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney. "The pound will definitely be volatile ahead of the vote.”
The pound advanced 0.2% to $1.4676 as of 07:41 after appreciating to $1.4783 on Tuesday, the strongest level since January 4. The British currency was little changed at 76.69 pence per euro.
Sterling will rise to trade in a range of $1.52 to $1.55 if “Remain” prevails, National Australia Bank’s Catril said.
The Pound Index, which tracks sterling against seven major peers, has risen 2.3% since June 17, set for its best week since surging 2.6% in the period ended October 16, 2009.
An IG/Survation poll on Tuesday put “Remain” at 45% and “Leave” with 44%. A day earlier, a YouGovpoll for the Times newspaper showed the pro-EU side leading by two percentage points, while a survey by ORB for the Daily Telegraph had “Remain” at 53% and “Leave” at 46% among those certain to vote.
A gauge of implied volatility for the pound versus the dollar over two weeks has dropped to 31% from a record 40.5 on June 14. It is still above the five-year average of 7.9%.
Billionaire investor George Soros, who made $1bn betting on a devaluation of the pound in 1992, warned about the economic dangers of leaving the EU on Tuesday, writing in the UK’s Guardian newspaper. The pound may slump more than 20% against the dollar, he wrote. Such a decline would be bigger than when he profited from betting against the currency.
“There’s a real reluctance by traders to sell the pound right now, given the fact that there are only 24 hours to cover that short position,” said Stephen Innes, senior trader at Oanda Asia Pacific in Singapore. “Unless something unexpected comes out in the polls, we’re going to remain fairly neutral for the next 24 to 36 hours.”
