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Pound hits seven-year low after Boris Johnson's Brexit decision - business live

Discussion in 'Market News' started by Lily, Feb 22, 2016.

  1. Lily

    Lily Forum Member

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    Sterling has slumped by 2% to its lowest point since March 2009, following London mayor’s decision to back the campaign to leave the EU


    3.19pm GMT

    Back with the pound, and the trade weighted index - its value against a basket of currencies - shows the UK currency is just above its 2014 lows but well above its lows of five years ago.

    3.04pm GMT

    Over to the US briefly and some weaker than expected manufacturing figures, adding to the idea that a rate rise from the Federal Reserve could be some way off.

    The Markit initial estimate for the manufacturing purchasing managers index came in at 51 for February compared to forecasts of 52.3 and last month’s figure of 52.4. This is the lowest reading since October 2012.

    2.53pm GMT

    Here’s our news story on Moody’s EU referendum warning:

    Related: Moody's warns Brexit would risk UK's credit rating

    2.52pm GMT

    All 30 Dow components have turned positive, and these are the top three leaders right now. https://t.co/ZVSOAAMusw pic.twitter.com/QgO94rVrg9

    2.43pm GMT

    World stock markets continue to be unbothered by the Brexit issue.

    Wall Street just opened, and the main US stock indices are up around 1%. In London, the FTSE 100 index of Britain’s largest companies is romping ahead, up 99 points or 1.7%.

    2.12pm GMT

    The UK government’s attempts to drum up support from Britain’s top bosses has hit a snag.

    Three of the country’s largest supermarket chains, Sainsbury’s, Morrisons and Tesco, are declining to sign a letter backing the Remain campaign.

    Top supermarkets refuse to sign FTSE firms' anti-Brexit letter https://t.co/7KbcgYCIfU

    2.07pm GMT

    City firm IG has just launched a new referendum barometer, showing how investors expect June’s vote to pan out.

    The data currently shows IG clients are still overwhelmingly predicting Britain is likely to remain in the EU at 67%. The likelihood of the UK leaving the EU has, however, risen 2% to 33%.

    1.53pm GMT

    The pound is also losing more ground against the euro.

    It has lost 1.25 eurocents so far today,or around 1%, to trade at €1.2774. That’s only its lowest point since last week, though.

    1.47pm GMT

    German’s Deutsche Bank isn’t happy with Boris today.

    Their chief investment strategist, Dr Ulrich Stephan, has tweeted that Brexit would be bad for Britain.

    #Brexit: London Mayor #BorisJohnson sides with the exit campaign. Financial centre and economy would be the losers. #DrStephan

    12.48pm GMT

    Breaking News: The pound has just hits its lowest point against the US dollar in almost seven years.

    Sterling has extended its losses, and just traded below $1.406 against the US dollar.

    UK pound now -2% today, on course for its biggest loss since 2010 general election. pic.twitter.com/3h7rmlkETK

    Are we allowed to say Sterling Crisis now?! https://t.co/zdkjHlXTNC

    Today the £ is having its 35th worst day against the dollar since the currency floated in 1971.

    12.38pm GMT

    Bill O’Neill, head of the UK Investment Office at UBS Wealth Management, has predicted that the Leave campaign will soon run out of steam, despite the Boris bounce.

    “We expect UK markets to be volatile over coming days as the campaigns step up a gear and investors adjust to the prospect of a referendum four months from now, but our base case remains that the UK population will decide to remain in the EU.

    Our Brexit probability remains at 30% as we monitor the public response to the agreement with other EU members.”

    12.24pm GMT

    Douglas Flint, chairman of HSBC, has warned that there will be a “heightened risk of uncertainty” if Britain votes to leave the EU.

    Flint said:

    “Every business in the UK would be reviewing its supply chain, legal agreements and its licences”.

    12.22pm GMT

    Investment bank Citi has just hiked its prediction for Brexit to between 30% and 40%.

    They took the move after Boris Johnson and Michael Gove (another senior Conservative) both backed the Out campaign over the weekend.

    Bank ups Brexit probability from 'Not Sure' to 'Mmm Dunno But A Bit More Than Not Sure'. Next stop: 'Coin Flip'

    12.15pm GMT

    The pound has now fallen to its lowest level in 22 months, when measured against a basket of other currencies (Reuters reports).

    11.58am GMT

    World First’s Jeremy Cook wins a small prize (a pound, perhaps?) for spotting that sterling isn’t the worst-performing currency today.

    It’s pretty close, though - only Liberia, the Seychelles and the small African island of Sao Tome & Principe are having a bleaker day than Britain in the FX market.

    Only the Liberian dollar, the Seychelle rupee and the Sao Tome & Principe dobra trading poorer than GBP today. pic.twitter.com/5Wvr8T8fc7

    11.44am GMT

    The sterling selloff is getting even worse, as the US financial markets shuffle into life after the weekend.

    The pound is now down by over 1.9% against the US dollar at $1.4122, a fall of 2.7 cents.

    Dollar now up 2% against the pound

    Sterling is falling a bit more now that US traders are waking up and asking 'who the hell is this Boris guy?'

    11.42am GMT

    Despite Boris’s backing the Out campaign still only have a 30% chance of victory, reckons Mujtaba Rahman of the Eurasia Group.

    Rahman point out that the In campaign has the support of many other senior Conservatives, including Home Secretary Theresa May.

    11.18am GMT

    Today’s selloff could be the start of a significant slump in the value of the pound.

    So fears Ranko Berich, head of market analysis at Monex Europe, who says the pound is “reeling” from the London Mayor’s move.

    “Sterling seems to have fallen off the Boris cliff this morning.....

    “Boris Johnson’s cleverly staged endorsement of the campaign to leave the United Kingdom grabbed headlines, and regardless of the London Mayor’s political motivations, this has had a sharp effect on sterling exchange rates. The implication is clear: while the Brexit referendum remains a live prospect, sterling is likely to be susceptible to these types of shocks, especially as the referendum date approaches.

    11.16am GMT

    The business group CBI has some slightly brighter news for Britain’s struggling manufacturing sector this month.

    “Demand and output have remained relatively unchanged from January’s performance. The challenging outlook for the manufacturing sector has stabilised a little, with sterling having depreciated, but Britain’s manufacturers are still facing a difficult global situation.”

    10.41am GMT

    Investors are anticipating many long weeks of drama around the EU referendum, which could shift the markets:

    Now that "Brexit" vote date has been decided we can now look forward to 4 months of name calling and scare mongering from both sides. #gbp

    10.27am GMT

    Here’s more reaction from the City to Boris’s intervention:

    Sterling's plunge for Boris larger than for the YouGov poll showing Yes winning in Scotland https://t.co/F5BvQSI8vU pic.twitter.com/Zrj1aEAcT0

    Sterling now seeing largest one day fall since 2010 General Election left us with a hung parliament.

    Of course Boris is a big deal. He's probably most popular politician in a politician-hating country. That's why £ is off.

    10.24am GMT

    Rating agency Moody’s has weighed in on the EU referendum - warning that it could cut Britain’s credit rating if the Out Campaign win in June.

    It told clients this morning that the outcome of the referendum is “too close to call”, and that Brexit would harm the economy.

    In Moody’s view the economic costs of a decision to leave the EU would outweigh the economic benefits. Unless the UK managed to negotiate a new trade arrangement with the EU that preserves at least some of the trade benefits of EU membership, the UK’s exports would suffer. It would likely lead to a prolonged period of uncertainty, which would negatively affect investment, in Moody’s view.

    It would also place a significant burden on policy-makers who would have to renegotiate the UK’s trade relations with the EU and other countries and regions, as well as reconsider other areas such as regulatory and immigration policies....

    Moody’s would consider reflecting those threats to the UK’s credit standing by assigning a negative outlook to the sovereign’s Aa1 rating following a vote to exit, pending greater clarity on the longer-term impact on the UK’s economic and financial strength.

    10.16am GMT

    More bad news. The pound has hit a 15-month low against a basket of other currencies, according to a Reuters newsflash.

    Sterling is only at a three-week low against the US dollar. But if it loses another cent, it will be its lowest in over six years.

    Pound once again approaching 2009 lows at prospect of UK's Jun referendum on EU membership. pic.twitter.com/acqEMzJX4s

    10.12am GMT

    New economic surveys have shown that Europe’s economy is slowing, potentially bolstering the Brexit case.

    Business growth across the eurozone is currently the weakest in over a year, data firm Markit reported this morning.

    PMI suggests Eurozone GDP growth could slow to 0.2% in Q1 https://t.co/Xjcs0jL9Hy

    9.52am GMT

    My colleague Andrew Sparrow is up and running, covering all the drama in Westminster in his Politics Live blog.

    He’s kicked off with the news that Boris’s father, Stanley, has firmly denied that his son is scheming to become prime minister by supporting the Out campaign.

    Related: Boris Johnson's Brexit declaration could be 'career-ending', his father claims - Politics live

    I think he has done a really well-thought-out move. When I say move, it is a move in the sense it represents his deep conviction that at this moment this is what he needed to do. Honestly, I think to say this is a careerist sort of move would be a total travesty.

    I cannot think of any more career-ending move than to do what he did yesterday, in the sense that he is leaving the mayoralty in May. If he wanted to get a nice job in the cabinet on May 8 this is not the way to do it.

    Boris Johnson's dad claims Boris's Brexit move cd be 'career-ending' (plus why he wasn't convincing) - https://t.co/wLQYpzpfMJ

    9.46am GMT

    The pound has fallen against all 31 of the other major currencies this morning, showing the scale of the rout:

    #Brexit fears batter #sterling (all 31 of its major peers are rising against the pound)... pic.twitter.com/UzbE6Kx83G

    9.38am GMT

    Ouch. The pound has now suffered its biggest one-day fall since the 2010 general election.

    This morning’s 1.7% plunge hasn’t been seen since May 2010, according to the data on our Reuters terminals.

    The pound dropped 1.7% to $1.4163 as of 9:20 a.m. in London, set for the biggest decline since the the day of the U.K. General Election on May 6, 2010.

    While the currency is down 3.9% this year, it remains above an almost seven-year low of $1.4080 reached in January.

    “The fact that prominent members of the Conservative Party announced they will campaign for Britain to leave the EU likely underscored investors’ concerns that Brexit risks could increase from here despite the deal.”

    Last time options markets were this bearish on GBPUSD we were recovering from the 2010 election/hung parliament - pic.twitter.com/cJpjRIR1j3

    9.20am GMT

    Ilya Spivak, currency strategist at DailyFX, suggests Boris’s popularity is fuelling today’s sterling selloff:

    “The British Pound slumped at the start of the trading week after London Mayor Boris Johnson said he would campaign for the UK to leave the EU ahead of a referendum on membership in the regional bloc set for June 23.

    A recent poll showed Johnson is second only to Prime Minister David Cameron in influencing likely voters.

    9.17am GMT

    Sterling is plumbing new depths, as Boris Johnson’s decision to defy David Cameron continues to reverberate around the trading floors.

    The pound has now dropped to $1.416 against the US dollar, a fall of 1.7% or 2.5 cents.

    Do I think that BoJo is worth a 2 cent move in GBPUSD? Absolutely not, but markets wanted to smack GBP & he has handed them a big old bat

    9.15am GMT

    This handy chart from Bloomberg shows how the pound has become much more volatile (white line) in recent weeks:

    9.06am GMT

    Here’s another sign of growing alarm in the City over the EU referendum.

    The cost of protecting against wild swings in the value of the pound has hit a 51-month high this morning.

    The six-month implied volatility in sterling/dollar -- a gauge of how sharp currency moves will be -- rose to 12.2 percent its highest since late 2011, according toReuters charts. The contract captures the date of the referendum, scheduled for June 23.

    Sterling options point to heightened #Brexit stress https://t.co/7s1PD1vbGl pic.twitter.com/hZIHCvUf7j

    8.53am GMT

    RBS Capital Markets analyst Sam Hill also blames the Out Campaign for weakening the pound:

    With both Michael Gove and Boris Johnson coming down on the “Leave” side of the debate, and almost half of the Conservative MPs, it is understandable that Sterling’s initial move has been lower.

    Uncertainty is the only certainty where the economics of Brexit is concerned. So, with political reaction to Friday’s deal looking more mixed than the Prime Minister would have hoped for, in the short term it is likely that the exchange rate will be sensitive to news which is seen to increase the probability of Brexit.

    Fantastic pictures of Boris Johnson leaving his home this morning. pic.twitter.com/7mG2sH6ZpT

    8.49am GMT

    Scotiabank analyst Alan Clarke agrees that Boris’s intervention is significant. He told clients this morning that:

    Another key development over the weekend was that London Mayor, Boris Johnson MP came out in support of the ‘leave’ campaign. This is potentially crucial since he is the most popular politician in the country and connects with young and old voters alike.

    8.35am GMT

    British government debt appears to be suffering from the swirling uncertainty over the EU referendum.

    The price of 10 year gilts (bonds issued by the UK) has fallen this morning. That pushed up the interest rate, or yield, on the debt to 1.44%, up from 1.41% on Friday.

    didn't really have a view previously, but interesting to see that early mkt reaction is to mark down GBP & Gilts on #Brexit worries

    8.30am GMT

    The pound is suffering from the fresh uncertainty over Britain’s future, explains Tony Cross, market analyst at Trustnet Direct:

    The “Brexit” conversation took another step forward over the weekend and this has the potential to dominate many a conversation over the next four months, but it’s worth bearing in mind that some established fund managers have already come forward to say that in or out will have little impact on the financial outlook for UK Plc.

    What is significant however is that this introduces a new layer of uncertainty into the equation, and that’s something broadly disliked by financial markets.

    8.24am GMT

    Although the pound is suffering this morning, shares in London are doing well.

    The FTSE 100 has jumped by 77 points, or 1.3% this morning, putting the blue-chip index back over the six thousands point mark at 6027. That extends its recent recovery, following heavy losses in January and early February.

    8.10am GMT

    Bloomberg have confirmed that sterling is suffering its biggest selloff since last March:

    Pound Falls Most in 11 Months as Johnson Backs ‘Brexit’ Campaign

    8.09am GMT

    The pound is likely to keep falling in the run-up to June’s vote, City experts fear.

    Currency expert Kit Juckes of Société Générale, the French bank, warns:

    The EU ‘Brexit’ referendum is going to dominate media debate over the next 124 days. Opinon polls show a small lead for the ‘out’ camp, but a large body of ‘undecideds’ will decide the eventual outcome....

    I think we are likely to see further sterling weakness ahead of the vote itself, as the debate rages and uncertainty undermines confidence. I can’t imagine the opinion polls moving decisively enough in either direction for clarity to emerge before June 23.

    8.02am GMT

    Sterling is also losing ground against the euro this morning.

    The pound has lost almost one eurocent, to €1.281, down from €1.29.

    7.53am GMT

    This poll shows why City investors are taking the London Mayor’s move seriously:

    7.52am GMT

    The pound has hit a three week low against the US dollar thanks to Boris’s intervention.

    This makes sterling the worst performing major currency this morning.

    $GBP taking a beating in early European trade #BorisJohnson pic.twitter.com/2fXQVfvT3n

    7.30am GMT

    Boris Johnson’s shock decision to back the Brexit campaign has sent the pound sliding, on track for its biggest fall in months.

    This is the only opportunity we will ever have to show that we care about self-rule. A vote to Remain will be taken in Brussels as a green light for more federalism, and for the erosion of democracy.

    Boris Johnson (BoJo) showing his hand does throw a spanner in the works, but the odds of a ‘Brexit’ are still around 35%.

    If the referendum can be won by the media then a scan of the headlines would say the odds of a ‘Brexit’ is modestly higher, but clearly the ‘Leave’ camp would certainly have liked a longer lead time.

    6.54am GMT

    Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

    Today could be dominated by talk about Europe.

    Guardian front page, Monday 22 February 2016: Johnson comes out for Brexit pic.twitter.com/zxFcEI0ser

    Oh boy... reading that we're 124 days from #Brexit referendum (thanks @kitjuckes). must not mix up my countdown clocks

    Our European opening calls:$FTSE 5982 up 32
    $DAX 9441 up 53
    $CAC 4253 up 30$IBEX 8248 up 54$MIB 17000 up 91

    Related: HSBC full-year profits edge up to £13.2bn as chief Stuart Gulliver takes pay cut

    Continue reading...
     

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