EU referendum: Sterling hits 2016 high as EU referendum day arrives

Up nearly 1% in overnight trading

clock • 1 min read

Sterling reached a 2016 high against the dollar this morning as Britons vote on the UK's future in the European Union, despite the most recent polls showing the final result is still too close to call.

The pound soared 0.94% in overnight trading to $1.4844 - its highest level since 31 December when it hit $1.485. However, it then pared back gains slightly to $1.4809 as the morning progressed and voting got underway.

Sterling has been particularly volatile during the lead-up to the EU referendum, culminating in the cost of hedging against swings in the currency over the next 24 hours surging to the highest on record overnight, according to Reuters

Meanwhile, the VIX or 'fear' index, the closely-watched measure of expected US equity volatility, climbed on Wednesday to its highest level in more than four months ahead of the Brexit vote.

After a strong week, the FTSE 100 has risen again this morning by 1.4% to 6,347, although trading is expected to be light today as traders await the referendum results early tomorrow morning.

Sterling has rallied almost 4% against the dollar in the past five days as the 'remain' campaign appeared to gain momentum, while the FTSE 100 is up 3.8% over the same period in a relief rally before the vote. 

Voting began today after months of campaigning. According to Betfair, the 'remain' odds have risen to 78%, compared to 22% for 'leave'.

This differs significantly from YouGov polls, which last night indicated a much closer result with 'remain' at 51% while 'leave' is on 49%.

There is £52.5m riding on the outcome, making the EU referendum the biggest political event in Betfair's history.

Earlier this week, George Soros warned a potential Brexit could be more disruptive for sterling than Black Wednesday in 1992.

He said the pound would fall by at least 15% if the UK votes to leave the single European market, and potentially more than 20% to below $1.15 against the dollar.

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