Pound drops towards two-month low as ‘Leave’ campaign pulls ahead

Bloomberg

The pound fell toward a two-month low as concern grew that the U.K. will leave the European Union.
Sterling declined against all but two of its 16 major counterparts as four polls from three companies put the “Leave” campaign ahead and the Sun, Britain’s biggest-selling newspaper, backed a Brexit on its front page. A gauge of the pound’s anticipated volatility over the next two weeks — a period that includes the June 23 referendum — climbed to the highest on record.
The disruptions belied improvements in the U.K. economy, with a report this morning forecast by analysts to show an increase in annual inflation to 0.4 percent.
“With the pound currently trading out of synch with fundamentals as Brexit risk is being priced into the currency, the improving consumer-price inflation outlook will largely be discounted,” ING Groep NV analysts led by Chris Turner, London-based head of foreign-exchange strategy, wrote in a note. “The Sun newspaper openly supporting Brexit today is not helpful for the pound either.”
Britain’s currency dropped 1 percent to $1.4132 as of 9:05 a.m. in London, a day after touching $1.4116, the lowest since April 14. Implied two-week volatility, which is derived from options, rose to 40 percent — three times the level at the beginning of this month.
The pound slipped 0.6 percent to 79.58 pence per euro, approaching an almost two-month low reached on Monday. Two new polls by ICM showed the “Leave” side opening up a five percentage-point lead over “Remain.” A YouGov Plc online survey showed “Leave” at 46 percent with “Remain” at 39 percent, while an ORB poll put “Leave” at 49 percent and “Remain” at 48 percent among those certain to vote.