Sterling faces post-Brexit cliff-dive as polls drive short positions

The Great British pound is set for not such a great session on 24 June if UK quits the European Union the day before, potentially seeing the UK unit cliff-dive to three-decade lows.

Trader short-selling was already mounting as markets feared a UK vote to quit the EU, known as Brexit.

"Currency traders appear to have been surprised at the strength of the Leave campaign," said CFD and spreadbetting outfit Pelican.

"It is clear that short positions in pound against dollar spike following opinion poll data that show Remain losing ground to the Leave campaign," Pelican added, referring to the past four months' trading data.

In mid-April, for instance, polls showing the Brexit camp ahead saw the number of short positions spike to 93% of all GBPUSD trades on the Pelican platform, it said.

On Friday, the ORB poll for the Independent showed 55.0% said they were now backing the option to leave the EU, against 45.0% who said they were supporting Bremain.

A poll of polls by the Financial Times today revealed a Brexit outcome had taken the lead for the first time, at 46% versus the Bremain camp's 44%. Previously, there was strong advantage for the Bremain campaign in telephone polls, but this has now mostly disappeared.

Against this backcloth, a Bloomberg survey of economists saw sterling spiralling down to $1.35 if Britain voted to leave the economic bloc. By contrast, a Bremain outcome would see sterling stride up to $1.5.

A drop to between $1.30-$1.35 a day after Brexit outcome was the average opinion from the 20-plus economists polled by the news agency. A range of $1.45-$1.50 was seen in a Bremain scenario.

At 14:19 BST, sterling was down 0.66% to $1.4163, and was down 0.59% to €1.2599.

FXTM research analyst Lukman Otunuga said market fear of an out vote had spawned a contagion that haunted investor attraction towards sterling.

"Volatility has intensified to unfathomable levels while uncertainty nears a peak following the conflicting polls which continue to leave the majority of investors on edge," Otunuga said.

"The GBPUSD has suffered greatly from the Brexit commotion and could be poised for a steep decline if Sterling bears install another round of heavy selling."

OANDA senior market analyst Craig Erlam expected sterling might hit new year lows even before 23 June. "Key support still remains around $1.40 for now, though."