The British pound is crashing on Tuesday after a new Brexit poll showed that the Leave campaign has moved into the lead ahead of the UK’s EU referendum, which is now just over three weeks away.
On Tuesday afternoon, a poll conducted by ICM for The Guardian showed that 52% of people are now backing Britain to leave the EU, compared to just 48% wanting to stay.
The poll caused severe jitters among currency traders, sparking a big sell-off in Sterling, which fell off a cliff at around 3.30 p.m. BST.
It has kept falling since, and just before 4.15 p.m. BST is down by more than 0.6% against the dollar. Here’s how that sell-off looks:
In recent weeks, the pound has been incredibly sensitive to changes in the outcome of polls. For instance, on May 24, sterling soared after an ORB poll showed the Remain campaign building a substantial lead.
The pound slumped early in 2016, hitting a near ten-year low in February after former Mayor of London Boris Johnson made his much-anticipated decision to back Brexit . Since then, markets started to price out the risk of a Brexit the pound has broadly stabilised. Earlier in May for example, it was reported that traders no longer fear that Britain will leave the EU
However as today’s poll shows that Leave is not only catching Remain, but may actually have a lead, the markets are reacting negatively.
Accendo Markets’ Mike van Dulken told Business Insider:
The driver this afternoon is the latest poll showing the Leave camp taking a surprise lead, undoing of a lot of the currency’s recent good work to get back above 1.46 and sit close to 2016 highs.
Polls of late had been showing the Remain camp comfortably in the lead, in some cases by quite a margin, which had helped GBP and many UK-exposed stocks rally on the prospect of the status quo being better than a jump into the unknown. The latest ICM phone poll shows a reversal of an 8pt lead by Remain to a 3pt deficit in the space of just 2 weeks. With less than three weeks to go though, be prepared for the polls to swing around even more as both camp trade blows over the merits of their respective campaigns.
Currency traders in the City of London are broadly expecting a Brexit to have a huge negative impact on the pound, with Joe Rundle of ETX Capital telling Business Insider last week that: “We’re planning for a 20% fall in Sterling and a 20% rise in dollar, so a 40% move. We’re planning for an instant move — no trading and no liquidity in between the two moves. We’re always stress-testing our systems but this is such a big event that you have to plan on extremes.”