Sterling slumps to 30-year low as voters back Leave
The pound has dropped to its lowest level in more than 30 years as Britain appeared to have backed a decision to leave the EU.
Strong Leave votes saw the pound hit $1.3305, wiping about 10 per cent off the value of the currency and reaching a level not seen since 1985.
Shortly after polls closed at 10pm on Thursday, the pound had rocketed to $1.50, its highest performance of 2016.
But as Leave votes flooded in in increasing numbers, the strength of sterling plummeted.
Chris Towner, chief economist at HiFX, said: “The momentum continues for the Leave vote with the difference between Leave and Remain widening close to one million votes.
“The networks are all calling an exit vote and the likelihood of an exit gets to 95 per cent probability. Sterling continues to suffer with GBP/USD dealing 10 per cent lower from its high only a few hours ago.
“It just goes to show how sensitive the currency markets are, as we were trading at $1.50 only a few hours ago and now GBP/USD is trading in the $1.33s.
“Arguably the exit vote is now priced into sterling as the UK wakes up to ‘Independence Day’.”
Bill O’Neill, head of the UK investment office at UBS Wealth Management, said: “Westminster, Brussels, the Bank of England and the European Central Bank will be under immediate and immense pressure to calm the markets. But the markets will not wait – they are a discounting machine and they will overreact first, think later.”
“Over the next 12 months we expect sterling to fall toward $1.30 against the US dollar, gilt yields to fall back towards 1 per cent and the FTSE 100 to drop by 10 per cent from levels before the vote. The euro and European equities will also come under pressure with the whole European project now under something of a cloud.”