The pound is set to extend its decline, the biggest among rich-world currencies, beyond the day of the referendum that could lead to a "Brexit".
Sterling has already dropped at least two per cent versus all of its Group-of-10 counterparts this year, and options prices suggest it will fall further against every one over the next three months. That would see the UK currency's losses extend beyond June 23, when the public will vote on the nation's membership of the European Union.
"We're in a situation where it's the 'Brexit' risk that will dominate markets," said Ned Rumpeltin, European head of currency strategy at Toronto Dominion Bank in London. Though economic data are showing an improvement, "what captures all the headlines is the risk of the referendum," he said. "Longer-term, the pound is going to struggle." Concern the UK will leave the world's biggest single market has weighed on the pound, sending it down four per cent to $1.41 as of Thursday.
There's a premium for options protecting against sterling losses over contracts betting on a gain in the case of every G-10 currency. The biggest is the 5.6 percentage-point premium for three-month options hedging a slide versus the yen, data compiled by Bloomberg show.