FX round-up: Pound higher as some speculators get 'stopped-out'

Cable continued climbing higher amid talk that some positions were getting 'stopped out' as markets appeared to grow less worried that voters in the UK would vote to exit the European Union on 23 June.

As of 19 April hedge funds and so-called large speculators had accumulated a net short position on a weaker pound - a three year high - of 55,152 contracts, according to the Commodities Futures Trading Commission.

Some of the more recent polls, including one from ORB/Telegraph published on Tuesday put the 'Remain' camp ahead at 51.0% versus 43.0% of voters who said they would throw their hat in the ring for the 'Leave' option. Nonetheless, that meant 'Remain' had lost two percentage points of support which were picked up by 'Leave'.

The cost of insuring against falls in sterling, as measured by the three-month sterling-dollar volatility index, dropped 130 basis points on Tuesday to 12.5% - its largest one-day fall since 8 may, 2015, the day after the general election - according to Bloomberg data.

Cable was standing 0.75% taller at 1.4590, near a 10-week high as of 16:19 BST.

"It looks as if there has been a change of sentiment [...] the options market in general is pricing in less chance of a big move around the Brexit vote and the market seems less worried it will happen," Commerzbank FX strategist Esther Reichekt said.

Weak US data continues, but analysts not overly concerned

Orders for US durable goods, excluding those from the transportation sector, fell by 0.2% month-on-month in March (consensus: 0.5%), data from the Department of Commerce revealed.

That followed what some analysts had termed anaemic figures in new US home sales released on 25 April.

However, Steve Murphy, US economist at Capital Economics, was not overly concerned, explaining to clients that many analysts had apparently failed to take into account the impact of seasonal adjustment factors on non-defence aircraft orders.

Furthermore, "Labour market conditions are robust, households have scope to run down their saving rate, interest rates are low and asset prices (housing and equity) are rising," Murphy said.

Be that as it may, euro/dollar was 0.35% up on the day at 1.1308

Dollar/yen was little changed at 111.23 and up by 0.02% as traders girded for the upcoming central bank policy announcements; in a recent strategy note strategists at Societe Generale cautioned clients that the odds of further monetary stimulus from the Bank of Japan in 2016 was just 30%.

In their opinion, it was now the turn of fiscal stimulus to prop-up the Japanese economy.

The main commodity currencuies were seeing solid demand, with the greenback lower by 0.35% versus the Canadian Loonie.

Brazil´s real meanwhile was 0.77% higher at 3.5309 against the US dollar, as the central bank opted not to intervene in markets on Tuesday.