FOREX NEWS: Pound loses 17-Week high on ‘Brexit’ scare

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EDITOR’S NOTE: Up and down like a yoyo, the pound plunged last week in response to a new poll showing the Brexit camp ahead in the run up to the UK’s EU referendum. A currency exchange specialist from TorFX explains.

The Pound crashed at the beginning of this week, dropping from a near 17-week high of €1.3196 to two-week low of €1.2863, erasing the previous week’s gains. The tumble was caused by the latest referendum polling data, which showed that the ‘Leave’ campaign held a 4% lead against ‘Remain’.

This ended the recent run of polls showing significant majorities in favour of remaining a part of the European Union. However, what really alarmed investors was that one of the polls which placed Vote Leave ahead was conducted via telephone. These polls have historically always returned a result that favours the ‘In’ campaign and investor shock at the result was clearly visible during the three-day rout on Sterling.

Today’s strong service sector activity data could help the Pound to recover much of the lost ground after showing a much stronger expansion than economists had forecast. Services accounts for around 80% of the UK’s economic output, so this solid performance is going to help ease the sting from lacklustre measures of manufacturing and construction that came earlier in the week.

The week ahead promises manufacturing production and trade data, both of which could prove highly Pound-supportive in the event of a strong result.

Of course, developments surrounding the referendum are less easy to predict, so there is the ever-present threat that ‘Brexit’ news could steal focus. As we’ve seen, the ‘Leave’ campaign seem to be reclaiming some of the ground lost a few weeks ago, so sentiment towards the Pound could remain bearish over the coming days if this trend should continue next week.

This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.