Boost for exporters as Europe polls strengthen sterling
Sterling has recovered over a third of its recent losses, giving a welcome boost to Irish exporters.
The pound was yesterday trading at 76 pence to the €1, down from 81 pence in early April, as a number of polls have shown momentum for the 'remain' side in the UK referendum debate.
Sterling started the week on a shaky note after warnings from Prime Minister David Cameron and finance minister George Osborne that a vote to leave the EU could push Britain into a year-long recession and cost at least half a million jobs.
But the latest poll from ORB published in Tuesday's edition of the 'Daily Telegraph' gave the "remain" camp a 13-point lead over their "leave" rivals.
And that seemed to soothe the nerves of traders.
John Moclair, head of customer Group at Bank of Ireland, said the sharp strengthening of sterling in recent weeks has surprised markets, both because there's still a lot of time to go until the referendum, and the softening of economic data out of the UK.
"In Ireland, the comeback of the pound signals a welcome relief, as it increases the purchasing power of UK importers, and gives Irish exporters an important competitive edge," Mr Moclair said.
"Nonetheless, this latest swing in EURGBP highlights the difficulties for Irish companies over the last six months as they have tried to manage their foreign exchange exposures.
"This headache is unlikely to disappear in the run-up to the June vote."
While the value of the pound has risen, it's still some way off the 69 pence to the €1 mark that was recorded last November.
Mr Moclair said that if the UK does vote to remain, there could be an aggressive strengthening of the pound in the immediate aftermath of the vote.
"The recent recovery may indicate that market participants are taking the opportunity to pick up some cheap pounds while they can," he added.
Meanwhile, Paul Sommerville of Sommerville Advisory Markets encouraged traders to sell sterling in the aftermath of a vote to remain, saying it will likely weaken after the initial flurry of activity in the aftermath of the vote.