Brexit brouhaha: Sterling hits new seven-year low against the dollar as EU referendum uncertainty continues to bite

Emma Haslett
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Pound down: the debate over the EU referendum has hit sterling (Source: Getty)

Thinking of going to the US this summer? Think again.

The pound fell as much as 0.9 per cent against the dollar this morning, dropping to a new low of $1.3897 - the first time it has gone below $1.39 since February 2009.

It also slid against the Euro, falling 0.58 per cent to €1.2651 - its lowest since November.

The slides came as the City was gripped by uncertainty over the EU referendum. Although polls suggest the chances of the UK voting in favour of a Brexit are just 30 per cent, investors continued to panic after Boris Johnson came out in favour of the "leave" camp.

"The pound is one of those currencies that once a trend is in place it becomes very difficult to stop, particularly when markets fall out of love with it," said Michael Hewson, chief market analyst at CMC.

"Up until a month ago some surmised that Brexit concerns had hit sentiment in the pound and it was certainly an easy argument to make then, however the declines have now since gained traction across the board, though we still remain above the lowest levels on a trade weighted basis that we saw in 2009.

"That being said it is now indisputable that the pound is being affected by some of the uncertainty surrounding the UK’s involvement in the European project and the upcoming referendum vote. It is also true to say that the euro is being affected as well, something the ratings agencies might do well to turn their attention to as well warning of the consequences to the UK."

This week ratings agencies warned of the economic cost of Brexit to the UK. In a statement on Monday, Moody's said it could automatically lead to the UK's credit rating being put on a negative outlook.

"Unless the UK managed to negotiate a new trade arrangement with the EU that preserves at least some of the trade benefits of EU membership, the UK's exports would suffer," it said.

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