1st March 2016
Global currency markets are suffering, amid concerns of the UK leaving the EU in the upcoming referendum.
Sterling has fallen to its lowest in seven years against the Dollar and lowest in one year against the Euro (click for chart) – and as the referendum draws closer, this volatility is not expected to lessen.
A weak pound helps exporters by making British goods cheaper on international markets – and it also makes the UK a better value destination for tourists, injecting cash into the economy. However, a weaker pound makes imports more expensive, hurting consumers and businesses that rely on foreign goods.
Andy Scott, economist at HiFX, says: “There are various speculative headlines about what could happen to the pound in the event of Britain voting to leave the EU, and it’s impossible to say how likely any of the outcomes seem, as we’ve not faced this scenario before. However, most do agree that the UK economy would likely suffer and the pound would fall – at least in the short term – if we left the EU.
“We’ve seen a huge uplift in activity over the past few days, as businesses and consumers panic and move to transfer their money quickly; numbers of GBP/EUR transactions have increased dramatically – up 32% year on year. Many of our clients are taking the opportunity to grab exchange rates whilst they can in case they fall further, to help them reduce the impact of a further fall on the costs of their life or assets overseas.”