Sterling traded near a six-week high against the euro on Monday, buoyed by growing expectations that Britons would vote to stay in the European Union after U.S. President Barack Obama waded into the debate.
Sterling rose 0.1 percent against the dollar to $1.4413 and hit a six-week high against the euro of 77.52 pence per euro in early Asian trade.
Last week, the pound posted its best week against the single currency since early March as odds swung in favour of the campaign to stay in the European Union. From 37 percent early last week, the chances of Britain voting to leave the EU in the June 23 referendum fell to 30 percent, according to the Betfair betting exchange.
Bookmaker Ladbrokes also reported a shift in betting towards the “Remain” campaign and number of opinion polls indicated that those in favour of staying in the Union were gaining an upper hand.
Traders said Obama’s appeal for Britain to remain in the 28-country bloc was helping sentiment as it underlined the weight of argument in recent weeks from global and financial leaders in favour of staying.
“The might of Obama’s public relations has helped sterling reach highs against the euro, as odds swing against the Brexit campaign,” said Tobais Davis, head of corporate treasury sales at Western Union.
“Obama’s support for (Prime Minister David) Cameron and his comments eluding to trade deals taking close to a decade to reach caused upset in the exit camp, but gave the currency a boost.”
Obama said on Sunday that Britain could have to wait a decade for a free trade deal with the United States if it votes to leave the European Union. He spent a bulk of his stay late last week urging Britons to stay, adding that leaving would be a mistake.
Sterling has fallen sharply since the referendum began to filter into market pricing in early December and some major banks earlier warned of a crisis for sterling that would drive it to as low as $1.20 if Britain votes to leave.
Investors worry that a current account deficit of 7 percent of national output leaves the country vulnerable to foreign inflows with buyers of UK assets spooked by a possible British exit.
Indeed, speculators have increased their short positions on sterling to the highest level in nearly three years in the week to last Tuesday. For graphic see: reut.rs/1XUWCmS.
Source: Reuters