LONDON: Falls against a broadly stronger euro kept sterling under pressure on Wednesday despite some minimal gains against the dollar as the tightly fought referendum on European Union membership entered its final six weeks.
Since falling 7 percent in the first months of the Brexit campaign proper, the pound has recovered solidly, helped by the intervention last month of US President Barack Obama to note risks in leaving the bloc.
But with surveys conducted since Obama's remarks still pointing towards a very closely fought referendum on June 23, there have been some renewed signs of nerves among investors.
Finance minister George Osborne said in parliament on Wednesday that a vote to leave could prompt a balance of payments crisis and problems for Britain's banking sector.
Separately, a survey showed four fifths of major British firms have already moved to hedge against the risk of sterling falling sharply after a vote to leave, with companies expecting an average 12 percent fall in the pound.
"The risk of exit is drifting up a bit, but it's drifting up having come down with quite a wallop on the day that Obama interjected," RBC Capital Markets currency strategist, Adam Cole, said. He called the referendum a "huge lump of uncertainty" for investors. Sterling was down 0.4 percent against the euro by 1520 GMT at 79.03 pence.
Against the dollar it was up 0.2 percent at $1.4465. The British economy has shown signs of weakening. Data on Wednesday showed British factory output recorded its biggest annual fall in nearly three years in March.
A Reuters poll of economists pointed to slow and steady growth in the coming year but also saw that at risk if Britain votes to leave the EU or if jitters over the world economy intensify.
Money markets continue to price in a substantial chance of a cut in Bank of England interest rates by the end of the year, a reflection of concerns over the impact of a Brexit - or the turbulence caused by the vote alone - on growth.
"Our perspective is that Brexit is clearly a risk and a destabilising risk for the global markets generally," said Tina Byles Williams, Chief Investment Officer with US asset manager FIS Group.
"In our sector calls, we are focussed on sectors that have some real pricing power at a time of low inflation - that does not lead you to UK assets. So we do not have a huge exposure to the UK, even absent Brexit."
Groups campaigning for Britain to leave the EU have raised 8.2 million pounds ($12 million), more than the rival "In" campaign, a watchdog said on Wednesday.
The Bank of England's monetary policy committee releases updated growth and inflation forecasts in a quarterly report on Thursday.
"The recent slowing in the UK's dataflow is compounding the effects of political uncertainties and keeping rates markets inclined to price for a small risk of policy easing rather than the early 2017 rate hikes that we expect," BNP Paribas strategists said in a research note.
"Sterling appears overvalued versus the dollar (and) the soft dataflow, in addition to the upcoming political risk, suggests that there is scope for another period of sterling undershooting," they wrote.
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