The latest rebound in the pound comes on the back of indications from the polls that the support for the ‘Stay-in’ vote has reached one of its highest levels in recent months.
We think that this maybe an early indication that the latest government campaign to avoid Brexit is finally starting to bear fruit. In addition, weaker UK data of late has further added credibility of the growing chorus of officials (including the BoE) and business representatives voicing their fears about the damaging impact of a potential Brexit on the UK economy.
Last but not least, the EU officials have taken steps to tackle the refugee crisis and that may take the edge off some of voters’ worst fears.
Abating Brexit fears could continue to support GBP even though we doubt that a trend reversal higher is on the cards is likely.