Sterling hits 2016 high after poll suggests Britain staying in EU

YouGov's poll suggested a 52% vote to stay in the EU against 48% to leave

Sterling surged to a 2016 high against the US dollar on Thursday after an opinion poll suggested Britons have voted to keep the country in the European Union, a relief for investors who had feared a Brexit would trigger market uncertainty and volatility.

YouGov's poll, the closest thing in Britain's EU referendum to a publicly available exit poll, suggested a 52 per cent vote to stay in the EU against 48 per cent to leave. The final official result is expected around 0600 GMT.

Sterling raised more than a cent to a fresh 2016 high of $1.5004 from $1.4975 before polling stations across the country closed at 2100 GMT. The euro fell to a one-month low of 76.01 pence.

Sterling has rallied 7.0 per cent in the past week as investors grew more confident that a Brexit, with all the associated market uncertainty and volatility most analysts anticipated such an outcome would unleash, would ultimately be avoided.

"We need a slam dunk before we move up top the $1.52-53 range. It's not all over, but the market is starting to discount it (a Remain victory) quite aggressively now," said David Bloom, head of global currency strategy at HSBC in London.

"Volatility should collapse too," Bloom added.

The cost of hedging against sharp swings in sterling over the short term fell sharply after the YouGov poll was released.

Amid very thin liquidity conditions, overnight sterling/dollar implied volatility traded at around 42 per cent, down from 72 per cent before polling stations across the country closed at 2100 GMT. Earlier on Thursday, overnight volatility reached a record 125 per cent.

One-week implied volatility also fell, to 19 per cent from around 25 per cent.

YouGov's poll was based on responses from a pre-selected group of people seen as representative of the wider electorate on how they actually voted in the referendum.

The referendum on whether to quit the EU was bitterly-contested, and polarized the nation. Financial markets, on edge for weeks over the uncertain outcome, rallied on the strength of late polls that showed a swing towards staying in.

Banks had warned clients about volatile trading conditions around the results which may lead to large gaps in prices. Barclays stopped accepting new "stop loss" orders as of 0600 GMT, an extremely rare move for one of the big six banks that dominate the world's biggest financial market.