The pound gained the most in a week against the dollar as data showed an unexpected acceleration in U.K. wage growth, while traders waited for more signals on the possible outcome of Britain’s vote on European Union membership.
Sterling advanced versus all but one of its 16 major peers, gaining a boost from rising stock markets before the Federal Reserve is forecast to leave U.S. rates unchanged in its policy announcement later Wednesday. Data also showed the U.K.’s unemployment rate fell to 5 percent in the three months through April, the lowest since 2005. Economists surveyed by Bloomberg forecast the rate staying at 5.1 percent.
While the Bank of England is set to deliver its latest policy decision Thursday, the June 23 EU vote has been dominating moves in the currency market. Sterling fell to a two-month low on Tuesday after five polls in 24 hours put the campaign to leave the EU ahead of those in favor of remaining.
“The markets are already pretty short pound and they will wait for more indications from the polls that the support for Brexit is growing before adding to the shorts,” said Valentin Marinov, head of Group-of-10 foreign-exchange strategy at Credit Agricole SA’s corporate and investment-banking unit in London, referring to bets on the pound’s decline.
Sterling rose 0.6 percent to $1.4200 as of 11:51 a.m. London time, the biggest jump since June 7. It dropped to $1.4091 on Tuesday, the lowest since April 14. The pound strengthened 0.5 percent to 79.05 pence per euro, for the first gain in four days.
The U.K. currency is still the worst performer of Group-of-10 nations in 2016 as investors shunned the asset amid fears a Brexit would lead to a period of political and economic uncertainty. Whatever the result, June 24 is likely to be a volatile day for the pound. Sterling will either sink to the lowest level in more than three decades or climb toward the highest this year, according to a Bloomberg survey of economists.
No economists are forecasting any change to BOE policy Thursday and markets are currently pricing in a greater chance of a cut to interest rates than a hike over the next year. Central-bank Governor Mark Carney said last month that Brexit could cause a recession in the U.K., as the Monetary Policy Committee cut its growth forecasts.
Wednesday’s data may be seen as an encouraging indicator of the underlying economic resilience of the U.K. economy,” Credit Agricole’s Marinov said. If Britain votes to stay in the 28-nation bloc, the pound will be one of the best-performing currencies in the second half of the year, he added.
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