Sterling volatility surges to seven-year high following new Brexit polls

Matthew Ryan08/Jun/2016Currency Updates

Sterling strengthened on Tuesday, recovering much of its recent losses against the Euro following the release of two overnight polls that showed a very narrow lead for the vote to ‘remain’ at this month’s EU referendum.

The latest polls, from YouGov and ORB, both showed a 1% advantage in favour of remaining a member of the EU and this comes in sharp contrast to a string of polls last week that suggested the vote to ‘leave’ had taken a narrow lead.

A spike in Cable on the back of the news during low-liquidity Asian trading yesterday highlights the recent unprecedented volatility in the Pound, which now appears to be trading on Brexit polls and nothing else.

One-month implied volatility in the currency surged to its highest level since January 2009 yesterday, with large unpredictable swings in Sterling likely to continue right up until polling day on 23 June.

The distinct uncertainty over the referendum result is dominating the risk mitigation strategies of businesses with exposure to G3 or G10 currencies. We’ve therefore observed the vast majority of our clients engaging in hedging to reduce downside risk and capture any potential upside.

The Euro received little help from the release of the latest growth figures in the Eurozone which showed the economy in the Euro-area expanded more than expected in the first quarter of the year. GDP growth was revised back up to 0.6% in the first three months of the year, higher than the same measure in both the UK and the US.

Meanwhile, the Australian Dollar was one of the best performing major currencies in the world on Tuesday. The currency appreciated in excess of 1% against the US Dollar after the Reserve Bank of Australia kept its benchmark interest rate on hold and suggested that it was in no hurry to cut interest rates further following signs of improvement in the domestic economy.

This morning’s manufacturing and industrial production figures in the UK are both expected to remain flat on a month previous. The Reserve Bank of New Zealand will also meet this afternoon, although we expect the RBNZ to hold rates.

Major currencies in detail:


Renewed support for the UK to remain a member of the EU sent the Pound 0.5% higher against the US Dollar on Tuesday.

In tandem with the polls yesterday, implied probability of an ‘in’ vote among bookmarkers rose back above 72%. We think the best indicator is provided by the Number Cruncher Probability score, which attempts to take into account the biases of each poll. This score now sees the likelihood of Brexit as just over 24%.

Away from the EU referendum, house prices rose by 9.2% in annualised terms in the three months to May, according to Halifax. They’re likely to slow during the remainder of the year due to affordability of housing.

Manufacturing and industrial production figures will be the highlight today, although expectations for the referendum remain key for Sterling.


The Euro was little changed on Tuesday, remaining around its highest level in three weeks against the US Dollar following last Friday’s dismal US payrolls report.

The Eurozone economy was given a welcome boost by yesterday’s GDP numbers, which showed a greater-than-forecast 1.7% expansion in the first quarter of the year. According to Eurostat, the revised final estimate was supported by stronger household spending and business investment.

This rebound will be particularly welcome news to the European Central Bank in its quest to jump-start the fairly stagnant Eurozone economy.

No economic data in the Eurozone today means that attention among Euro traders will likely be on events elsewhere.


With no major economic releases driving the US Dollar yesterday, the Greenback fell by just 0.1% against its major peers.

There was little major economic data to report yesterday. Nonfarm productivity fell in the first quarter, highlighting the still fragile state of the US labour market. Productivity declined by 0.6%, and has now increased just twice in the past six quarters,having fallen by 1.7% in the final three months of 2015.

In contrast, unit labour costs rose more than expected. The quarterly measure increased by 4.5%, although it failed to budge the US Dollar yesterday. The Dollar continues to trade mostly on Fed hike expectations.

JOLTS job openings at 15:00 UK time will be the main data point today in an otherwise quiet trading session in the US economy.


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Written by Matthew Ryan

Strategy Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.