Pound’s worst day for seven years as Brexit jitters strike
The pound suffered its worst day for seven years yesterday after Boris Johnson joined the campaign for Britain to leave the Eu.
Worries about ‘ Brexit’ sent sterling down as much as 2.4 per cent to $1.4057 – the biggest one-day fall since 2009.
the pound is now at its lowest level since March 2009. it is feared that it could fall further as uncertainty over Britain’s future takes its toll.
experts said Mr Johnson’s decision to campaign to leave the Eu – joining senior cabinet members including Michael Gove and iain Duncan Smith – made Brexit more likely.
Michael Saunders, chief UK economist at citigroup, said: ‘Until now, the Brexit side has lacked the backing of one of the heavyweight figures in UK politics. that has now changed with the backing of Gove and in particular Johnson.’
Kit Juckes, an economist at Societe Generale, said: ‘We are likely to see further sterling weakness ahead of the vote itself as the debate rages and uncertainty undermines confidence.’
But shares in london rose – the FtSe 100 index was up 1.5 per cent to 6037.73 – as the stock market brushed off Brexit fears. international rating agency Moody’s said it could cut Britain’s credit score if the country leaves the Eu in a move that would push up borrowing costs for the Government, businesses and households.
rival agency Fitch also said Brexit would hurt the economy.
‘We consider it positive that the referendum will take place as soon as June, as a lengthy period of uncertainty on the part of firms and investors would damage the UK’s economic growth prospects,’ said Kathrin Muehlbronner, a senior vice president at Moody’s.
‘that said, the outcome of the referendum remains wide open. in our view, a decision to leave the Eu would be credit negative for the UK economy.’
experts at Goldman Sachs have warned that sterling could fall to as low as $1.15 if the UK cuts off its ties with Brussels – a level not seen since 1985. But a weaker pound could be good news for the British economy by providing a much-needed boost to exports.
Star fund manager neil Woodford, one of the country’s most successful investors, last week said claims that leaving the eU would crash the UK economy were ‘bogus’.
He said any weakness in the pound would be ‘relatively temporary’ and would boost exports by making British goods cheaper for foreign buyers.
the cBi said the weakening pound was already helping UK manufacturers. rain newton-Smith, director of economics at the business lobby group, said: ‘the challenging outlook for the manufacturing sector has stabilised a little, with sterling having depreciated, but Britain’s manufacturers are still facing a difficult global situation.’
Dr Howard Archer, chief european and UK economist at research group iHS Global insight, said ‘the marked weakening of the pound’ was ‘welcome news for UK manufacturers’.
experts yesterday said Mr Johnson’s decision to join the ‘leave’ campaign – pitting him against David cameron – made Brexit more likely in the referendum on June 23.