The pound has soared to its highest level against the dollar since David Cameron set the date for the EU referendum, as Brexit fears eased and banks shunned the offer of emergency cash from the Bank of England.
Sterling hit a high of $1.4783 this morning – well up on the lows of $1.41 plumbed last week – as it climbed by another 0.5 per cent following yesterday's surge.
That rate is up on the level the pound was trading at when David Cameron returned from Brussels and announced the date for the EU referendum on 20 February. It is also the second highest level reached this year, after the high of $1.4815 touched in intraday trading on 4 January.
If sterling manages to hold on above $1.4734 it will be the highest close of 2016.
In response to yesterday's strong performance on the markets and sterling's impressive ascent, UK lenders rejected the Bank of England's offer of extra emergency liquidity in the run-up to the referendum. In the second of three extra auctions where banks can swap assets for cash with the bank, only £370m was snapped up this morning – the lowest amount in a single offer in 18 months and significantly down on the £2.5bn claimed in the first special offer last week.
Low demand for the extra money suggests banks are either happy with the amount of liquidity they have or do not believe Brexit risks to be serious enough to go to the Old Lady for help.
A number of opinion polls showing the tide turning in favour of Remain have led to the odds of a vote to Leave also drifting. Leave is now a best price of 3/1 – out from their shortest ever level of 7/4 reached at the beginning of last week.
2016 Intraday highs
On the stock markets, the FTSE 100 was down 0.3 per cent at 6,184 in mid-morning, a slight revision on yesterday's three per cent climb.
In the last seven days, sterling has climbed more than six cents, almost entirely, analysts said, in response to referendum news.
The pound also stretched back above €1.30 – jumping 0.3 per cent this morning after hitting €1.26 last week.