British pound up as markets see lower risk of EU exit

AP News
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Posted: May 24, 2016 7:41 AM
British pound up as markets see lower risk of EU exit

LONDON (AP) — The British pound posted strong gains Tuesday as market expectations waned somewhat of a British exit from the European Union, so-called Brexit.

With less than a month to go before the June 23 referendum on Britain's future in the 28-country EU, bookmakers have slashed their odds on a "remain" vote.

On Tuesday, some were offering as little as 1-7 — one pound in return for a seven pounds' bet, half as generous as just a couple of weeks back. The odds of a Brexit have widened to around 4-1 over the same time period following a string of polls suggesting that the "remain" camp is building up a sizeable lead.

"This puts the chance of Brexit close to 20 percent after adjusting for the bookmakers' margins," said Mark Dampier, head of investment research at London-based stockbrokers Hargreaves Lansdown.

That fairly limited expectation of a Brexit vote has helped the pound claw back some ground in recent days. On Tuesday, the pound was up 0.8 percent to a near-month high of $1.4595 following a poll showing the "remain" camp with a 13-point lead.

The economic uncertainty that a Brexit vote would likely entail has been one of the major factors hurting the pound this year. In February, the currency fell to a seven-year low of $1.3873.

One of the main reasons being touted for the change in odds on Brexit has been a proliferation in the warnings against Brexit. The Bank of England, for one, has warned that an exit from the EU could plunge Britain into recession and weigh heavily on the pound.

"Concerns over the economic impact appear to be pushing people towards the status quo, and as a result U.K.-focused assets are in demand once again this morning," said Chris Beauchamp, Senior Market Analyst at IG.