Is Threat of a Brexit Harming the Pound?

Posted by Allison on 1 March 2016, 12:45

Last week we saw that news of a referendum on Britain’s position in the EU had a significant effect on the British pound. Would we see more of the same this week? Let’s find out whether the pound could finish the last full week in February in good or bad condition.

An overview of the currency markets for February 22nd – February 26th 2016

Trading got underway on Monday morning with the British pound standing at 1.4277 against the US dollar. There was a noted drop on day one as sterling fell to 1.4092 here, but it did recover to 1.4107 by Tuesday night. However, the early drop was not to be the only one we experienced this week. Wednesday night saw another one – this time sending the pound down to 1.3911. The effort was there to try and aid a recovery over the final two days of the week, but it was not to be. Instead, the pound closed things out on 1.3976.

Now to the pound’s standing against the euro. It began trading on 1.2867 and had a similar two-day pattern here as it had against the dollar. Firstly, it fell to 1.2780 on Monday night, before rising to 1.2822 by Tuesday evening. Indeed, as it turned out, the entire week went much the same way it had against the US dollar. Unfortunately, this meant the pound was destined to finish the week in worse shape than it had begun – although it did regain some ground late in the week. It finished on 1.2699 as a result.

The overall pattern we would see against the Hong Kong dollar wouldn’t be much different to the one seen elsewhere either. We began trading on 11.100, but that would be the only time we had an exchange rate worth 11.000 or over this week. Monday night saw a drop to 10.950, and although we improved a little the next day, there was a further drop on Wednesday – this time to 10.810. From then on the news was better, but the final rate of 10.859 didn’t do much to swell our confidence in the state of the pound at the moment.

Over to the other side of the world now, to see whether the New Zealand dollar would also be somewhat stronger than the British pound this week. We’ve already seen rocky performances from the pound, and unfortunately here things would get even worse. The opening rate was 2.1567 for the pound, but from that moment on, things went on a downward slide that lasted the entire week. The closing rate was a shocking 2.0759 – meaning we’d lost a total of a little over eight cents across the entire week.

Would this be matched in Australia too? We began trading on 2.0079 but immediately fell back to 1.9582 on Monday evening – a massive one-day drop. That was not the end of the process, however. The dollar pushed back against the pound and by the time Friday night arrived, the pound had been reduced to a rate of 1.9398 – another significant drop over the course of a week.

Notable events in the world of currency

More bad news against the Canadian dollar

Here too the pound didn’t do at all well. It began on 1.9653 and finished poorly on 1.8933.

Would we do better against the Swiss franc?

This European country isn’t part of the EU but the pound didn’t do well here either. It dropped from 1.4176 to 1.3878 this week.

Another fall against the Icelandic krona, too

Here too we didn’t experience a good week, falling from 183.514 to close things out on 180.195.

There was plenty to be concerned about this week, as we can see. Yet perhaps the pound will even out a little now that news of the referendum has been released and we all know when it will happen. However, it is a long time yet until the vote, which could mean a tough few months for the British pound.