DJ HSBC's Brexit Forecast Says Sterling Could Tumble 20% to a Three Decade Low
By Mike Bird
Sterling hit a fresh seven-year low on Wednesday, but the selloff may only just be starting.
If Britain votes to leave the European Union on June 23, the pound could fall by between 15% and 20% against the dollar, according to HSBC .
The pound has already been hit hard amid concern over a U.K. departure from the EU and on Wednesday fell by more that 0.5% against the dollar, leaving the British currency below $1.40 after Monday's tumble. That takes the pound's losses for the week to over 3%.
But that's nothing, says HSBC. If the U.K. does drift towards so-called Brexit the pound could push past levels against the dollar last seen in 1985.
That's because the uncertainty that a decision to leave the EU would cause could drive investors away from U.K. assets, HSBC says. Lower demand or British investments from abroad would mean less demand for sterling, causing the pound to fall.
Other forecasters have projected a fall in the pound if the June referendum ends in a U.K. exit.
In a note earlier in February, Goldman Sachs analysts said Brexit "would increase uncertainty, weigh on the U.K. outlook and raise concerns of foreign investors." Similarly, Deutsche Bank researchers said that "a U.K. exit from the EU is likely to negatively impact sterling."
But HSBC has put a number on it, and that number is the most dramatic so far as investors contemplate the latest EU drama.
(END) Dow Jones Newswires
london red 10:14:51 GMT - 02/24/2016
i dont look at it but i wouldnt touch cable upside til 13808. if below 50 gets there but they may frontrun if str8 line.
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