LONDON: Sterling was roughly steady on Wednesday, showing resilience in the face of a soft batch of industrial output data and another round of political noise ahead of June's vote on a "Brexit" from the European Union.
Norway's $830 billion sovereign wealth fund, the world's biggest, was the latest to weigh into the EU debate, saying it would probably increase its investment in Britain whatever the result of the June 23 referendum.
Buckingham Palace dominated domestic media by saying it had made an official complaint to Britain's press watchdog over a report in tabloid newspaper The Sun headlined "Queen backs Brexit". The palace said the monarch remains politically neutral.
The pound, which fell to a 7-year low after the announcement of a date for the referendum last month, has since then recovered around 3 percent. By 1719 GMT it traded at 77.43 pence per euro, within sight of one-month highs against the common currency hit last week, and rose 0.1 percent to $1.4228.
Another Scandinavian name, Danske Bank, said much of the Brexit risk had now been priced in but advised its clients to hedge sterling heavily against the euro.
"We think the recent decline in the euro has created a window of opportunity to establish sterling hedges," Danske analysts said.
"The issue hasn't really impacted any of their hedging decisions yet," he said. "Euro-based clients should maintain a high short-term FX hedge ratio on sterling risks."
Other bankers and fund managers say major speculative investors have so far stopped short of betting heavily on the risks surrounding the vote.
Tony Bedikian, Managing Director of Global Markets at Citizens Bank in Boston said his client base of medium-sized U.S. corporates with interests in sterling and euro were watching closely but had largely yet to act on Brexit concerns.
"Obviously they are watching the volatility in sterling over the past couple of weeks. But after the first knee-jerk selling in sterling of a few percent, we've already rallied back. It is (still) viewed as a low probability event."
Opinion polls have shown British voters split almost down the middle on whether to vote to leave the EU. Bank of England Governor Mark Carney was the latest this week to point, very cautiously, to the economic risks of leaving the bloc.
Bookmakers' odds - often a better measure of UK political outcomes than opinion polls and a reflection of market expectations - show a roughly 30 percent chance that Britain will leave.
Many analysts say that suggests the pound's 9 percent fall from early December levels has priced in most of the event risk and further losses would require a clear shift in the polls.
"The market-implied probability of a Brexit has closed the gap with voter intentions in polls by now, below but close to 5 percent," said Xavier Chapard, Global Macro Strategist with Credit Agricole in Paris.
Chapard said much was already priced in and "downside risks are henceforth limited, even if UK assets will remain volatile during the campaign".
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