Poundsterling Took a Hit Over Possible "Brexit"
Poundsterling suffered the biggest drop in one day. Risk of Britain leaving EU trigger the market sentiment against the British currency. While Prime Minister Cameron stressed the importance of U.K. stays in the European Union.
Following Boris Johnson Sunday's announcement of his support to choose Britain leaving the European Union, poundsterling dropped to more than 2% against dollar. Investors look dismay with the announcement and drove the poundsterling to seven-year low drop in a day at $1.4057 level.
A currency trader in ETX Capital Richard Wiltshire told Reuters, "Boris has upset the apple cart in going against his party leader. Everyone is now thinking it's going to be a much closer-run thing than we previously thought."
Furthermore he added, "From now until the election, sterling will ebb and flow on the polls, but I think the uncertainty will weigh until we get the vote and any rallies in sterling will be used as an opportunity to sell it."
Meanwhile UK chief economost of Citi Group Michael Saunders wrote, "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 (Justice Secretary Michael) Gove and, in particular, Johnson."
United Kingdom will hold the referendum to vote whether Britain should stay in EU or leaving the union on June 23. Based on the opinion polls, citizens are divided over the issue, while there are large numbers of voters still undecided.
UBS economist David Tinsley wrote in his note, "From a market perspective, the most likely barometer of uncertainty is the currency, and... we believe there is significant further downside potential for sterling in the build up to the vote."
Meanwhile Prime Minister David Cameron made his remarks to remain in the union. As quoted by CNN he said, "Britain will be out of the parts of Europe that do not work for us -- we will be permanently and legally protected from being a part of an ever-closer union."
Prime minister Cameron also noted the threat of islamic terrorist and Russian aggression are real one that intimidating all European nations including Britain.
Some of Britain top companies have also announced their stance by signing a letter to support the vote for staying in EU. The Guardian reported that EasyJet, BAE Systems and Shell are among the list which was signed by a third of the companies listed on the FTSE 100 index.
Although the Brexit referendum is still months away, but Poundsterling have suffered a hit by looming possibility of Brexit. Meanwhile Prime Minister Cameron was backed by many Britain's top companies to stay in EU.