GBP/USD: Trading As Risky As Bookmaking

FX:GBPUSD   British Pound / U.S. Dollar
The British pound remained fragile near a two-month low against the USD on Tuesday on worries Britain may leave the European Union in a referendum less than 10 days away.
Britain's "Leave" campaign opened up a 7-point lead over "Remain" ahead of a referendum on membership of the European Union an opinion poll showed late Monday. According to the YouGov poll for The Times, "Leave" held 46% support compared with 39% support for "Remain." Undecided voters were 11%, while 4% won't vote.
An ORB poll for The Daily Telegraph put support for "Leave" at 49%, compared with Remain's 48%, while two ICM polls, one online and one conducted by telephone, found "Out" held 53% support compared with 47% support for "In," the Guardian newspaper, which sponsored the telephone poll said.
The implied probability of a British vote to stay in the EU fell to as low as 64%, down around 14 percentage points from last Thursday when the probability was 78%, according to betting odds supplied by Betfair. Bookmaker William Hill             said it was offering its shortest ever odds - 7/4 or a 36% implied probability - on the chances of a vote to leave the European Union.
The Office for National Statistics said consumer prices rose 0.3% compared with a year ago, slightly below expectations for a 0.4% rise. Still, BoE policymakers are unlikely to put too weight on the inflation data when they meet this week, given the uncertainty created by next week's referendum on Britain's European Union membership. In May the Bank of England forecast inflation would stay below 1% until almost the end of the year and to undershoot its target until 2018, due to the global slump in oil             prices, the effect of past rises in sterling and lacklustre wage growth.
Core consumer price inflation , which strips out changes in the price of energy, food, alcohol and tobacco, held steady at 1.2%, compared with market expectations for it to rise slightly to 1.3%. Factory gate prices fell 0.7% on the year compared with forecasts of a 0.5% annual drop.
We expect elevated volatility on the GBP/USD             in the coming days, as the GBP is a hostage to Brexit referendum polls now. Trading the GBP is now as risky as bookmaking. Brexit referendum. Any position would be unjustified from risk/reward perspective. We think the safest strategy now is to stay sideways on all GBP pairs.

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