Sterling held its ground today, managing to steer clear of a 30-year low against the dollar.
The pound spiked at $1.3996, a climb of around half a per cent on its value at the start of the day. However, if later fell back to $1.3920.
The pound has fallen sharply this week after London Mayor Boris Johnson announced he would be supporting a vote to leave the EU. It has lost 3.3 per cent of against the dollar since the start of the week.
Sterling had also dropped in recent months – it had a value of $1.54 in October. It has not fallen below $1.36 for over 30 years.
“It is not easy to assess how much the weakness of GBP is due to Brexit risk. Correlations with the US dollar and the euro have destabilised and it is not straightforward how cyclical developments, such as disappointing UK economic data and a more dovish stance by the Bank of England, can be disentangled from Brexit risk. But it seems fair to say that GBP is around four to seven per cent weaker because of it,” said Jaco Rouw, global fixed income investment manager at NN Investment Partners.
“But Brexit risk only seems to have been priced in to an extent, as the referendum outcome is hard to predict. Brexit would probably be a major shock, having large repercussions on both the UK and the Eurozone.”