The British pound was attempting to continue its run of volatility on Tuesday, edging higher against the US dollar in early European trading a day after the currency recorded its biggest one-day gain in almost eight years.

Buoyed by weekend polls showing that voters in favour of the UK leaving the EU had seen their lead whittled down by the Remain camp, sterling had jumped 2.4 per cent on Monday – its biggest single-day gain since December 15 2008.

In European trading on Tuesday, sterling was up 0.1 per cent at $1.4711.

Coupled with a gain of 1.1 per cent on Friday, the currency has jumped 3.5 per cent over two trading days – its biggest since December 16 2008 and also its fourth-largest since 1971.

So far this year the pound has traded as high as $1.4816 at the start of 2016, and as low as $1.3836 in February.

Sterling has become a prominent measure of investors’ attitudes towards the country’s referendum, with the currency’s fluctuations mirroring changes in opinion polls and volatility spiking to levels last seen in the 2008 global financial crisis.

Brexit

Analysts at National Australia Bank said that in the event of a Brexit, sterling could depreciate by 10 per cent against the US dollar to about $1.30, before drifting to the mid- to high-$1.20s over the following weeks.

“The risk with an event of this nature and as yet untested less liquid markets is a GBP/USD fall is larger - perhaps significantly - given that a lower gross domestic product would be part of the adjustment for the UK economy faced with a 7 per cent current account deficit,” NAB analysts said. “If the Remain camp succeeds, sterling could jump to as high as $1.55.”

The pound’s rise on Monday was prompted by a series of polls that showed Britons were increasingly likely to vote to remain in the EU in Thursday’s referendum on membership in the 28-country bloc.

Better polling for the Remain camp has buoyed stock markets in the UK and across the globe, but Monday’s sharp increase underscored the potential for further market upheaval if the Leave camp ultimately wins the vote.

On Monday evening, an ORB poll for the Daily Telegraph gave Remain a 53/46 point lead, while a YouGov Times poll had Leave at a 51/49 advantage.

The Financial Times poll of polls has the contest evenly balanced, with both sides registering support from 44 per cent of voters.

– Copyright The Financial Times Limited 2016