Polls and the run-up to June 23rd for Sterling exchange rates

Here we are. After months of talking about little else, June will be here tomorrow. As early as February we have seen the highs and lows of both the Remain and Leave campaigns heavily influencing Pound exchange rates.

From the plummet of the Pound following Boris Johnson taking up the mantle of the leave campaign in February, to its resurgence following the visit of Barack Obama in April, we have already been subjected to a rollercoaster on foreign exchange rates and vote is only about to be ‘around the corner’. Markets have made no secret that the Pound’s value will be higher if it is more likely that we’ll be staying.

The Remain camp have been gaining ground since April, but this has since stalled. They still lead most Polls, but a closer look into these results creates a picture far from simple.

The Financial Times most recent poll has it as 46% Remain to 41% Leave, the rest undecided. Whilst the Economist has it as 40% Remain, 39% Leave and a staggering number of undecided. There is clearly variance. Even within a single company, Ipsos-Novi, their telephone poll had the Remain camp up by 8 points whilst their online poll had the leave camp up by 4!

The average on all polls seems to be what markets are reacting to, with 53% being given to the Remain camp, and 47% to the leave. But they will be fully aware that with any poll the margin for error is given as plus or minus 3%.

Unless the Remain camp gains a larger lead, I fully expect that as we edge closer to the Referendum the Pound will come under further pressure. It seems that the recent momentum for the Remain camp has bought a period of stability for the Pound, but markets will be forced to make some decisions soon on whether to entirely trust that Polls promise the result they are looking for. Otherwise it would be fair to expect banks, companies, and individuals to relieve themselves of the risk in holding Pounds, and any mass sell-off will result in Sterling weakness.

I strongly recommend that anyone with an upcoming foreign currency requirement should detail this to their account manager. We may be subjected to very sudden falls this month, and it is important to be in-tune with what expectations are showing, otherwise waiting could become an expensive strategy.

Economic performance to still affect the Pound in the background

In the short-term, the Pound will still be subject to effects of economic data releases for the UK.

Tomorrow will see a see consumer credit, manufacturing figures and mortgage approvals as the main talking points around Sterling’s value. With such a varied look it is difficult to see which will be the deciding factor. Manufacturing has been poor for months yet consumer spending habits were found to be through the roof in May when retail sales figures grow more than twice as fast as expected. Yet markets are already aware of Sterling’s current manufacturing woes. Some positive news tomorrow could be the deciding factor, and may keep Pound buying rates near the 4 month highs we are currently enjoying.


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