Pound to Euro Exchange Rate Surges Today as the Remain Victory Rally Starts
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The GBP/EUR exchange rate has powered ahead by over a percent today confirming our base-case scenario that the currency should trade with a bullish in the run up to the UK's EU referendum on Thursday.
The move higher in sterling-euro actually started on Thursday 15 June and was a reflection of a shift in perception towards the EU referendum which was, at the time, just 7 days away.
We believe markets read the horrific murder of MP Jo Cox as an event that would impact the debate in favour of Remain.
"In some ways, it took the tragic death of Jo Cox for people to wake up to the positive message that she purveyed on the benefits of integration and tolerance. Perhaps it is a coincidence, but that incident has seemingly formed a turning point for the Remain campaign, with the improved fortunes of both polls and the pound ever since," says Josh Mahony, a market analyst with IG in London.
The momentum continues to shift in Remain's favour with a poll carried out Friday-Saturday, published yesterday, showed support to remain.
The Financial Times' poll of polls is reporting a tie (44-44).
However, Bloomberg’s compilation of betting firms’ odds shows that the probability of Leave to win has fallen to just over 30%.
Nevertheless, we must warn against complacency as this entire saga has proven that the only certainty is uncertainty.
"The GBP strengthened as new polls came in, but uncertainty will remain prior to the vote. Most of the polls report 10-15% undecided voters, which means these undecided voters as well as the participation rate will have a great impact on the final turnout," says a brief from Sweden's SEB Bank released today.
Therefore, don't be surprised if sterling takes a dive between here and the release of results.
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