United Kingdom: British pound plummets amid Brexit fears
February 25, 2016
United Kingdom’s pound (GBP) has lost significant ground against both the U.S. dollar and the Euro in recent weeks. The currency tumbled to its lowest level in seven years on 24 February when it traded at 1.39 GBP per USD. The figure was 2.2% weaker than on the same day in the previous month and 9.8% weaker on an annual basis. The pound hasn’t fallen below 1.40 GBP per USD in over two decades. On the same day, the pound traded at 1.26 GBP per EUR, which marked a 3.8% depreciation on a monthly basis and a 8.3% depreciation over the same day of last year.
The currency has been under escalating pressure amid fears over UK’s exit from the European Union (Brexit). Recent opinion polls show that a small majority of the British people are in favor of the country remaining in the union, however fears over a possible Brexit is raising questions about the country’s economic outlook, in particular UK’s exports. The country’s imports already exceed its exports, and a widening of the current account would put further pressure on the pound.
Author: Dirina Mançellari, Senior Economist