LONDON, March 9 (Reuters) - Sterling rose half a percent against a weakened euro on Wednesday, showing resilience in spite of British industrial output growing by less than expected in January.
The pound, which has been broadly steady since a Brexit-driven sell off at the end of last month, traded at 77.07 pence per euro, within sight of one-month highs against the single currency it hit last week and also inched up to $1.4228.
Bankers and fund managers say major speculative investors have so far stopped short of betting heavily on the risks surrounding a UK vote on European Union membership.
The announcement of a June 23 date for the Brexit referendum drove the pound to its lowest in 7 years at around $1.38, reflecting nerves over the Brexit vote but short of predictions that sterling could fall around 20 percent on an “Out” vote.
Tony Bedikian, Managing Director of Global Markets at Citizens Bank in Boston said his client base of mid-sized U.S. corporates with interests in sterling and euros were watching closely but had largely yet to act on Brexit concerns.
“The issue hasn’t really impacted any of their hedging decisions yet,” he said.
“Obviously they are watching the volatility in sterling over the past couple of weeks. But after the first knee jerk selling in sterling of a few percent, we’ve already rallied back. It is (still) viewed as a low probability event.”
Opinion polls have shown British voters split almost down the middle on whether to vote to leave the EU and Bank of England Governor Mark Carney was the latest to point, very cautiously, to the economic risks of doing so.
Bookmakers’ odds - often a better measure of UK political outcomes than opinion polls and a reflection of market expectations - show a roughly 30 percent chance Britain will leave.
Many analysts say that suggests the pound’s 9 percent fall from early December levels has priced in most of the event risk and further losses would require a clear shift in the polls.
Sterling gained 2.6 percent last week and is up another cent this week, helped by a firmer oil prices weakening the dollar.
“The market implied probability of a Brexit has closed the gap with voter intentions in polls, by now, below but close to 5 percent,” said Xavier Chapard, Global Macro Strategist with Credit Agricole in Paris.
Chapard said much was already priced in and “downside risks are henceforth limited, even if UK assets will remain volatile during the campaign.” (Editing by Alexander Smith)