Monday, February 22, 2016

Forex - Sterling extends losses, hits six-year low on Brexit worries

Investing.com - Investing.com – Sterling hit a six-year low against the dollar on Monday as worries surged over the possible British exit from the European Union (EU), known as 'Brexit'.

Cable took a pounding on Monday as the probability appeared to rise that the U.K. would vote to leave the EU on the referendum scheduled for June 23.

London Mayor Boris Johnson announced on Sunday his decision to back the "out" campaign on the Brexit , dealing a blow to Prime Minister David Cameron's "stronger together" campaign.

To add to the panic, some of Cameron's closest business advisers were refusing to endorse the deal reached with the EU last week.

At least half a dozen of the 20 member Business Advisory Group declined to sign a letter that would argue that the UK's exit from the EU would put the British economy at risk, according to sources cited by Sky News.

Credit rating agency Moody's Investors Service wrote in a report released on Monday that the outcome of the referendum was 'too close to call'.

'In our view, a decision to leave the EU would be credit negative for the UK economy," Kathrin Muehlbronner, a senior vice president at Moody's, warned.

Along similar lines, Italian Prime Minister Matteo Renzi warned that Britons would be worse off in the case of a Brexit.

'If Great Britain leaves, the main problem will be for the U.K., its businesses, entrepreneurs and its citizens,' he said.

With uncertainty on the rise, GBP/USD hit a six-year low on Monday and, at 13:06GMT or 8:06AM ET, plunged 2.21% to 1.4087.

GBP/JPY sank 1.68% to 159.54 as investors flocked to the safe-haven currency.

Finally, EUR/GBP rose 1.24% to trade at 0.7823.

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