Sterling: Weakest Performer Among the Major Currencies - BBH

Sterling: Weakest Performer Among the Major Currencies - BBH

Research Team at BBH, notes that the Sterling is the weakest performer among the major currencies today. 

Key Quotes

“Initially, it was bid to a three-day high near $1.4725 before reversing to a five-day low.  Technically, the outside down day requires a close below the previous day's low (~$1.4588). 

The proximate cause is two-fold.  First, the latest ORB poll confirmed reports that the Brexit vote is much tighter than some of the recent polls suggest (51% to 46% in favor of remaining).  A London bookmaker indicated that the new money placing wagers favor the "leave camp."  This can be seen in the options market, where one-month volatility has jumped to 17.25% from 16.6% before the weekend and 11.1% a week ago.  The premium for sterling puts over calls widened to 5.7% yesterday, and indicative prices suggest it remains near there today. 

There are also some concerns that regardless of the outcome of the referendum, the heated battle will generate a challenge to Prime Minister Cameron.  Chancellor of the Exchequer Osborne has not yet been rehabilitated after the poorly received budget, and in any event is seen as too close to Cameron to be an alternative.”