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Pound given boost by projected remain win in EU referendum Pound plummets after early results in EU referendum
(35 minutes later)
The value of sterling has swung wildly on currency markets as initial confidence among investors expecting a remain vote was dented by early referendum results. The value of sterling has swung wildly on currency markets as initial confidence among investors expecting a vote to remain in the EU was dented by early referendum results.
Results from Newcastle, which showed a smaller victory for remain than expected, and a thumping leave majority in Sunderland, reversed earlier gains to leave the pound worth only $1.43, down from the $1.50 just after polling stations closed. Results from Newcastle, which showed a smaller victory for the remain camp than expected, and a thumping leave majority in Sunderland, reversed earlier gains to leave the pound down nearly 4% at $1.43 at one point, compared with $1.50 just after polling stations closed.
STERLING THROUUUUGH THE FLOOOOR pic.twitter.com/eTTQ0nnu5uSTERLING THROUUUUGH THE FLOOOOR pic.twitter.com/eTTQ0nnu5u
The earlier momentum for sterling was attributed to investors seizing on a YouGov poll that indicated a narrow victory for remain in the EU referendum. Sterling rose above $1.50 following the poll for Sky News, which gave the remain camp a 52% to 48% lead over Vote Leave. The earliermomentum for sterling was attributed to investors seizing on a YouGov poll that indicated a narrow victory for remain. Sterling rose above $1.50 following the poll for Sky News, which gave the remain camp a 52% to 48% lead over Vote Leave.
However, market watchers said the mood changed immediately in the wake of the Newcastle result. Kathleen Brooks, research director at City Index, said: “Newcastle has announced the results of the vote, and even though remain has won, it only secured victory by a very narrow margin of 0.6%. However, market watchers said the mood changed after the Newcastle result. Kathleen Brooks, research director at spread betting firm City Index, said: “Newcastle has announced the results of the vote, and even though remain has won, it only secured victory by a very narrow margin of 0.6%.
“The pound versus the US dollar has been knocked below 1.50, as the market worries that the unofficial exit polls may not be reflective of the actual result. This uncertainty is leaving the market cautious around this huge psychological level for GBPUSD. “The pound versus the US dollar has been knocked below 1.50, as the market worries that the unofficial exit polls may not be reflective of the actual result. This uncertainty is leaving the market cautious around this huge psychological level for GBPUSD.”
Jeremy Cook, chief economist and head of currency strategy at WorldFirst, said: “Sterling has collapsed... It can go a lot further as well.” Jeremy Cook, chief economist at currency broker WorldFirst, said: “Sterling has collapsed … It can go a lot further as well.”
Sitting in the dealing room of the currency trading firm, Cook watched sterling slide to $1.4450 - down 4% - after the Sunderland vote came in, after its sharp rise to $1,50 as the poll closed at 10pm.He has warned there could be a fall of “biblical” proportions if the vote is to Leave. Sitting in the dealing room of the currency firm, Cook watched sterling slide after the Sunderland vote came in. He has warned there could be a fall of “biblical” proportions if the vote is for Brexit.
“I thought $1.50 was about the level we would have seen once a Remain vote was confirmed. We may have seen most, if not all, of the sterling positivity.” He added: “Still significant risks for the pound, growth is so weak we don’t know the effects of the referendum campaigns on business, consumer and investor confidence and we don’t know how long that’s going to take to rebalance”. “I thought $1.50 was about the level we would have seen once a remain vote was confirmed,” Cook said. “We may have seen most, if not all, of the sterling positivity.”
Brooks of City Index added: “Nigel Farage was in fighting spirit when he gave a press conference earlier. It certainly didn’t seem like the Brexit issue was put to bed. If the margin of victory for Remain is smaller than expected, then we could see further attempts to get the UK to leave the EU. But he warned there were “still significant risks for the pound; growth is so weak we don’t know the effects of the referendum campaigns on business, consumer and investor confidence and we don’t know how long that’s going to take to rebalance”. After the initial 4% slide, sterling recovered marginally to be trading 2% down at $1.45 in the early hours of Friday morning.
Brooks added: “Nigel Farage was in fighting spirit when he gave a press conference earlier. It certainly didn’t seem like the Brexit issue was put to bed. If the margin of victory for remain is smaller than expected, then we could see further attempts to get the UK to leave the EU.”
However, Cook warned of severe consequences if the result confounded recent polling. “On the other hand, the collapse of a leave win, something the market has almost fully discounted, could be truly biblical.”However, Cook warned of severe consequences if the result confounded recent polling. “On the other hand, the collapse of a leave win, something the market has almost fully discounted, could be truly biblical.”
Earlier in the day, the pound broke through $1.49 against the dollar for the first time since December, before easing back in the afternoon. After breaking $1.50 shortly after polling stations closed, it was back trading around $1.49 shortly before midnight.
The FTSE 100 index added a solid 1.2%, or 77 points, to close at 6338, the highest since late April.The FTSE 100 index added a solid 1.2%, or 77 points, to close at 6338, the highest since late April.
The FTSE and pound have been buffeted by close opinion polls during the campaign but in the past week market sentiment has swung to show growing confidence in a vote to remain in the EU. The FTSE has rallied every day this week and by Thursday’s close was up 5.3% for the week so far.The FTSE and pound have been buffeted by close opinion polls during the campaign but in the past week market sentiment has swung to show growing confidence in a vote to remain in the EU. The FTSE has rallied every day this week and by Thursday’s close was up 5.3% for the week so far.
The FTSE’s gains were mirrored on other European bourses, with the leading share indices in Germany and France both closing up almost 2%. On Wall Street, the Dow Jones industrial average closed 1.3% up.The FTSE’s gains were mirrored on other European bourses, with the leading share indices in Germany and France both closing up almost 2%. On Wall Street, the Dow Jones industrial average closed 1.3% up.