The British pound has slumped further in value against the dollar on worries that the UK is more likely to leave the European Union.
Foreign exchange dealers do not like the uncertainty which was added to by London’s Mayor Boris Johnson saying he will campaign for a Brexit. He joins a number of senior members of the ruling Conservative party who are defying their leader Prime Minister David Cameron. Up until now the ‘Out’ campaign has lacked a political heavyweight to lead its efforts.
“The out camp were struggling to get a figurehead who was popular and Boris has given them that boost,” said Alvin Tan, a strategist with French bank Societe Generale in London.
“There is genuine worry that Britain might vote to leave and the uncertainty is going to rise into the referendum.”
Britons will vote on the issue in a referendum on 23rd June.
At one stage on Monday sterling was down more than two percent against the US currency at a seven year low of below $1.41.
It also fell sharply against the euro and the Japanese yen.
The pound has already lost more than 17 percent against the dollar in the last 18 months with concern over Britain’s possible departure from the EU at the heart of the fall.
Several banks are now talking up the chances of a slide to as little as $1.30.
Beyond the currency, the impact on business, banking and policy of a four-month run-in to the June vote looks more nuanced.
Some banks have raised the prospect of the Bank of England cutting record-low interest rates further to offset any damage to economic growth in the short-term.
That might weaken the pound but could further inflate the value of other assets including those stocks seen as well-insulated against the negatives of a Brexit.
The pound had gained against the dollar on Friday after David Cameron negotiated a deal to reform Britain’s relations with the EU last week.
That included a legally binding decision granting Britain an explicit exemption from the founding goal of “ever closer union” and safeguards for the City of London financial centre.