GBP: Sterling likely to dance to the tune of Brexit referendum – Rabobank

By FXStreet FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, suggests that last month an ICM opinion poll indicated that 42% of British voters would prefer to stay in the EU while 41% would rather leave.

Key Quotes

“The poll also indicated that substantially more were inclined to vote for exit if PM Cameron fails to reform rules regarding migrants’ right to live and work in the EU. Sterling has been a poor performer over the past month or so reflecting both the political risk and the recent spate of poor UK economic data. Concerns triggered by the downward revision of Q3 GDP growth at the end of last month to 0.4% q/q from 0.5% q/q have been underpinned by release of worse than expected UK December manufacturing PMI survey.”

“Slowing growth combined with weak inflation suggests the BoE is likely to maintain a cautious approach to interest rate policy. This morning sterling has benefitted from some short-covering. That said, even though the UK curve still offers a relatively attractive yield compared with its Eurozone counterparts, we expect that sterling’s ability to perform well this year is likely to be countered by the forthcoming EU referendum. We have moderated our forecasts for EUR/GBP …read more

Source:: FX Street