The British sterling is heading for its biggest single-session loss since October 2009 after London mayor Boris Johnson threw his weight behind the campaign for Britain to exit the EU.
The pound hit a seven-year dollar low as investors saw the move by the charismatic Mr Johnson as an early blow to Prime Minister David Cameron’s effort to persuade voters to reject “Brexit” in a referendum due on June 23, increasing uncertainty over the outcome.
Moody’s fuelled concerns on Monday, warning that a vote to leave the EU could have implications for Britain’s credit rating.
“Overall, I think we are likely to see further sterling weakness ahead of the vote itself, as the debate rages and uncertainty undermines confidence,” warned Kit Juckes at Société Générale.
Pressure on the pound intensified on Monday, leaving it down by as much as 2.4 per cent to a session low of $1.4059. The fall took the UK currency under the $1.4079 intraday low it touched on January 21, taking it to its weakest level against the dollar since March 2009.
The euro strengthened 1.4 per cent against the pound to £0.7833.
Mr Cameron was due to present the results of his renegotiation of the UK’s terms of EU membership to the House of Commons at 3.30pm.
“I can’t imagine the opinion polls moving decisively enough in either direction for clarity to emerge before June 23,” Mr Juckes added. “Any closes below $1.42 [against the dollar] or above £0.7850 [for the euro] would open the way to further weakness for sterling.”
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