Sterling has come under heavy selling pressure as the debate on whether to remain in or leave the EU appears to be increasingly polarised, notes Australia and New Zealand (ANZ).
"Some senior cabinet ministers, the Mayor of London and up to 150 of 330 Conservative MPs are reported to be in favour of leaving," ANZ adds.
"Political uncertainty, the UK’s current account deficit and diminished expectations of rate rises are weighing on sterling," ANZ argues.
"As the political uncertainty over “Brexit” continues and the opinion polls ebb and flow, sterling will remain vulnerable. We maintain our view that sterling will fall into a 1.35-1.40 range vs USD near term," ANZ projects.
"Whilst EUR/GBP may be expected to trade with an upward bias, political developments in the UK may also weigh on sentiment towards EUR/USD. Much of the European press has been quite negative about the agreement the EU reached with the UK. In Germany, the Frankfurter Allgemeine Zeitung argued that “if the UK leaves it could be a turning point that in the worst case could mark the beginning of the end for the European project.” In Spain, El Pais argued that if the UK leaves the EU it could inflict great danger on the European project. Despite elections this year, the US looks politically safe near term and the USD may find support as a result," ANZ adds.
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