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Sterling rebounds vs euro after death of pro-EU British lawmaker

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Sterling rallied from a two-month low against the euro on Thursday, extending gains after British police said Jo Cox, a lawmaker for Britain's opposition Labour Party, had died after being attacked earlier in the day.

Cox was one of the members of parliament advocating for Britain to remain in the European Union, an issue that will be decided in a referendum next week. Cox was attacked as she prepared to hold a meeting with constituents in Birstall near Leeds.

EU referendum campaigns were suspended on Thursday following Cox's killing, with the pro-EU Remain camp falling behind the Leave camp in polls.

"We're seeing a move in the pound rallying off its lows, the Treasuries coming off of their highs and the stocks coming off of their lows because of that," said Lou Brien, market strategist, at DRW Trading in Chicago.

GBP/USD intradaySource:FactSet

"People are anticipating that this could be one of those things that turns a vote back in favor of remain. It would be liquidation of trades as opposed to putting on trades."

In afternoon trading, the euro fell 0.3 percent against sterling on the day at 79.07 pence, after hitting a two-month peak of 79.94.

Sterling was 0.1 on the day against the dollar at $1.4214 after trading lower for most of the session.

"It's possible that investors are anticipating something of a sympathy bump for the 'Remain' camp in the context of this," said Shaun Osborne, chief currency strategist at ScotiaBank in Toronto.

Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, said an event like this matters ahead of the referendum, although he was not sure whether it is enough to shift the odds to the "Remain" camp.

Cox's death almost overshadowed news that the Bank of Japan held off from further easing monetary policy, a non-move that caused the yen to spike across the board.

The yen jumped to its highest in more than three years against the euro and its strongest in nearly two years versus the dollar.

The Japanese currency also hit a three-year peak against sterling and a four-year high versus the Australian dollar.