Cocoa Traders Brace For Brexit Vote As British Pound Climbs
Cocoa traders are bracing for the UK’s vote Thursday, on whether to stay in the European Union, as the beans used to make chocolate are one of the few commodities to trade in British pounds.
Futures traded in London were little changed Wednesday, as investors awaited the vote, and the pound traded near a five-month high against the dollar. Cocoa may gain if a decision to leave the EU resulted in the UK’s currency tumbling, while the New York contract traded in dollars may decline.
Cocoa is the only major commodity trading in roughly equal volume, quality and market structure on both sides of the Atlantic, Citigroup, Inc. said this week in a report. That’s keeping traders on edge as they monitor the spread between prices.
“A weaker pound could push cocoa prices in London up,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in an email, “so London will outperform New York.”
Cocoa for July delivery rose less than 0.1 per cent to £2,271 ($3,352) a metric tonne on ICE Futures Europe at 3.04 p.m. in London. On ICE in New York, the contract for September delivery climbed 0.3 per cent to $3,156 a tonne after reaching $3,157, the highest for a most-active contract since 5 May.
The pound advanced 0.7 per cent to $1.4755 after appreciating on Tuesday to $1.4783, the strongest since 4 January. While momentum shifted last week toward a victory of the campaign to remain in the EU, the results of various polls remain mixed.
News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.