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| Sterling volatility rises amid fears over EU vote | Sterling volatility rises amid fears over EU vote |
| (35 minutes later) | |
| Sterling volatility has jumped to the highest level in more than seven years after a Guardian poll showed the Brexit camp is in the lead, as the EU referendum campaign picks up pace. | Sterling volatility has jumped to the highest level in more than seven years after a Guardian poll showed the Brexit camp is in the lead, as the EU referendum campaign picks up pace. |
| One-month implied sterling volatility – the price of insuring against swings in the pound against the dollar – rose to 19.6% from 17% a day earlier, as Brexit fears mounted before the 23 June referendum. | One-month implied sterling volatility – the price of insuring against swings in the pound against the dollar – rose to 19.6% from 17% a day earlier, as Brexit fears mounted before the 23 June referendum. |
| It was the highest level since the depths of the financial crisis in February 2009, a month before the Bank of England made the unprecedented move of cutting interest rates to an all-time low of 0.5%. | It was the highest level since the depths of the financial crisis in February 2009, a month before the Bank of England made the unprecedented move of cutting interest rates to an all-time low of 0.5%. |
| Sterling volatility is considered a sign of market anxiety, and Wednesday’s surge followed a Guardian poll that showed voters are 52%-48% split in favour of leaving the EU. | |
| The pound tumbled to the lowest level against the dollar in more than two weeks, at $1.4412. | The pound tumbled to the lowest level against the dollar in more than two weeks, at $1.4412. |
| Sakis Paraskevov, an analyst at IronFX, told Reuters: “Sterling remains sensitive to any new polls that place a leave vote ahead by a considerable margin. | Sakis Paraskevov, an analyst at IronFX, told Reuters: “Sterling remains sensitive to any new polls that place a leave vote ahead by a considerable margin. |
| “We expect the volatility in cable [sterling/dollar exchange rate] to continue rising in the coming days, given that polls just a few days before the vote may have a bigger market impact than they did previously.” | “We expect the volatility in cable [sterling/dollar exchange rate] to continue rising in the coming days, given that polls just a few days before the vote may have a bigger market impact than they did previously.” |
| Most economists believe that a vote to leave the EU would trigger a sharp fall in the pound, while a vote to remain would drive it higher. | Most economists believe that a vote to leave the EU would trigger a sharp fall in the pound, while a vote to remain would drive it higher. |
| Mark Carney, the governor of the Bank of England, warned last month that the British economy could slide back into recession if the country votes for a future outside the EU. | Mark Carney, the governor of the Bank of England, warned last month that the British economy could slide back into recession if the country votes for a future outside the EU. |
| Uncertainty over Britain’s membership of the EU is hitting a third of businesses in the UK manufacturing sector, which barely achieved any growth in May, according to a closely watched survey published on Wednesday. | Uncertainty over Britain’s membership of the EU is hitting a third of businesses in the UK manufacturing sector, which barely achieved any growth in May, according to a closely watched survey published on Wednesday. |
| Foreign demand for goods from British factories fell for a fifth month as firms reported that customers were unwilling to commit to investment before the 23 June referendum. | Foreign demand for goods from British factories fell for a fifth month as firms reported that customers were unwilling to commit to investment before the 23 June referendum. |
| Of the 427 businesses taking part in the Markit/CIPS survey, 27% said a potential Brexit was having a detrimental impact on business, while a further 8% said it was having a strongly detrimental impact. However, 51% said it was having no significant effect. | Of the 427 businesses taking part in the Markit/CIPS survey, 27% said a potential Brexit was having a detrimental impact on business, while a further 8% said it was having a strongly detrimental impact. However, 51% said it was having no significant effect. |
| David Noble, the chief executive of CIPS, said: “It is likely some manufacturers are maintaining a financial shield as a barrier against the uncertainties still affecting the sector, including those arising from the forthcoming EU referendum.” | David Noble, the chief executive of CIPS, said: “It is likely some manufacturers are maintaining a financial shield as a barrier against the uncertainties still affecting the sector, including those arising from the forthcoming EU referendum.” |
| The question on Brexit formed part of the monthly health check on the UK manufacturing sector, which showed activity at British factories grew by the smallest margin in May. The Markit/CIPS purchasing managers’ index made it just above the 50 mark that separates growth from contraction, rising to 50.1 in May from 49.4 in April. | The question on Brexit formed part of the monthly health check on the UK manufacturing sector, which showed activity at British factories grew by the smallest margin in May. The Markit/CIPS purchasing managers’ index made it just above the 50 mark that separates growth from contraction, rising to 50.1 in May from 49.4 in April. |