Analysts at TD securities noted that GBP/USD has dropped over 3% since the end of last week on fears of a possible exit of the UK from the EU.
“Widespread concern that the referendum, which has been set for June 23, could be a close one has been compounded by reports that around 20% of voters are reportedly undecided. The implication of this is that over the next four months there is the potential for the polls to swing either way. “
“The decision last weekend by London Mayor and popular politician Boris Johnson to throw his weight behind the ‘Leave’ campaign provided the trigger for this week’s sell off in the pound. Up until then many investors appear to have been expecting that the EU reform deal which was announced late on February 19 to have been sufficient to add conviction to the PM’s bid to remain in the system. On the basis that political uncertainty is currency negative we revised lower our 1 and 3 month forecasts for sterling on the back of the publication of the referendum date. That said, on the assumption that the ‘Remain’ campaign will be ultimately successful, our forecasts point to a stronger tone for sterling in the second half of 2016.”