Currency brokers report that euro and dollars sales have increased by almost 50% in the last three days, as investors and holidaymakers look to capitalise on the strong pound.
Sterling started to rally against both currencies at the start of the week, as weekend polls suggested the “Remain” campaign was leading the rival “Leave” camp in the EU Referendum.
UK voters decide today, and last minute polling suggests the outcome is still too close to call. But this has not dented the strength of the pound, suggesting markets are pricing in a narrow “remain” win.
In overnight trading the pound increased by a further 0.94% to be worth $1.4844. This is its highest level since the start of 2016.
However in early trading gains were pegged back marginally, although this morning the pound has continued to trade around the $1.48 mark.
Pound Rallies Against Most Major Currencies
IG Index pointed out that sterling has also gained ground against other currencies, including the euro. It’s most notable gains have been against the yen and the Swissie – traditionally seen as a safe haven in times of market turbulence.
The strong sterling rally this week – which has seen the pound climb 4% against the dollar in just five days - has led to a surge in currency sales.
HiFX – one of the largest money transfer specialists in the UK – reported that the number of holidaymakers buying euros and US dollars had risen 46% since the weekend.
Holidaymakers Cash In On Currency Volatility
Chris Towner, the chief economist at HiFX said: “If the UK votes to ‘leave’ today the pound will most likely nosedive in the short term. Many are warning that an out result could trigger a 15 to 20% fall in the value of the pound.”
Those heading to sunnier climes this summer, are clearly looking to buy ahead of any dip in values.
He said that in recent weeks currency valuations have been extremely volatile, depending on market opinion as to whether “Leave” or “Remain” held sway. It is entirely possible that if the vote is in favour of remaining in the UK, then the pound could climb still higher.
He added last minute buyers may want to consider hedging their bets – buying just some of their currency allocation ahead of the result, to take advantage of the current strong position. But leaving the option to top up sales, if the pound continues to increase in value.
Calm Before Storm On Currency Markets
A spokesman for IG Index – the spread betting firm – said it expected both currency and stock markets to “stay fairly neutral” while voting was underway. However this could change when the outcome becomes known, in the early hours of Friday morning.
Meanwhile on US markets, the Volatility Index, or VIX – also known as the ‘fear gauge’ - gathered momentum his week, ahead of the Brexit vote. This measure of expected volatility closed at its highest level for more than fur months on Wednesday – indicating nervousness among Wall Street traders in the outcome of this vote.
