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 has been written by a third party not owned or controlled by Spanish Property Insight (SPI).
SPI disclaims any responsibility or liability related to your access to or use of any third party content.