May 6, 2016 / 4:10 PM / in 2 years

Sterling hits 11-day low on persistent Brexit concerns

LONDON, May 6 (Reuters) - Sterling hit an 11-day low on Friday, as investors worried that a referendum on whether Britain should stay in the European Union was still too close to call, with seven weeks to go.

Regional and local elections, in which Britain’s main opposition Labour Party lost less ground than expected and was leading the race for London’s mayor, had no noticeable impact on the pound.

Instead, the primary medium-term focus for sterling remains the June 23 referendum on Britain’s membership of the European Union, with most polls showing the “In” and “Out” campaigns neck-and-neck.

Eikon readers can click cpurl://apps.cp./cms/?pageId=brexit for the latest news and analysis on the EU referendum.

Sterling had hit a day’s high of $1.4546 after a weaker-than-expected U.S. jobs report showed just 160,000 jobs were added in April, well short of the 202,000 expected. But it later retreated to $1.4422, its weakest since April 25 and down 0.4 percent on the day.

Average hourly earnings were the only bright spot in the employment report, rising 8 cents or 0.3 percent last month.

“The earnings data counterbalanced the jobs number, which is why the dollar rebounded,” said RBC Capital Markets currency strategist Adam Cole. “I wouldn’t want to go long sterling into the weekend ... The polls need to start improving from here, from sterling’s perspective.”

Despite most polls being close, bookmakers have consistently put the “In” campaign well ahead. Betting website Betfair shows the chances of leaving at around 31 percent.

Emboldened by those odds, some speculators are betting the pound could soar as much as 20 cents from current levels after next month’s referendum if Britons vote to stay in.

Most economists reckon leaving the EU would deal a blow to the British economy, with a hefty current account deficit - 7 percent of GDP in the last quarter of last year - leaving it vulnerable to any pull-back in investment flows. Any news that makes a Brexit more likely, therefore, knocks sterling.

For the week, the pound is down 1.2 percent versus the greenback, on track for its first weekly drop in four, having also been hurt by weak purchasing managers’ index (PMI) surveys that showed Britain’s economy slowed in April.

“The economy could well be on a shaky road ahead of (the)Brexit (vote) in June,” said Western Union’s UK head of corporate treasury sales, Tobias Davis.

Against the euro, sterling was down 0.4 percent at 79.10 pence. (Editing by Alison Williams)

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