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The US dollar has begun the week with a strong advance against sterling and the euro. Sterling’s drop, the most in several years, is not a function of macroeconomic policy.  It is a function of Brexit and its endorsement by London Mayor Johnson.  Recent polls and identified Johnson, who term as Mayor ends in early May, as the second most influential person on the issue after the Prime Minister himself.

Sterling fell to about $1.4050 by early North American trading and has subsequently moved broadly sideways.  Since the low was recorded, sterling has managed to recoup a cent and is finishing the North American session near its post-low highs.   We suspect the market has over-reacted, a near-term bounce can carry it back toward $1.4230-$1.4250.

Although Cameron appeared to have called the referendum to unite the party, with Johnson taking the other side, the battle for the Tory Party becomes a battle over EU membership, which the Conservatives sponsored in the first place.    The eurosceptics have enjoyed free rein, as other camp has been stymied by the negotiations.  However, look for those wanting to stay in the EU to begin making their presence felt in a way that was impossible until this past weekend.