Wednesday, July 6, 2016

UK Pound Down below $1.30 on Brexit jitters

UK Pound, finance, money

The UK Pound drop below $1.30 on Wednesday amid increasing anxiety about Britain’s vote to leave the European Union that force investors to put their money on safe haven assets.

“Sterling hit fresh lows against all of the major currencies and while there was no news to explain the move, the sharp sell-off sent fresh jitters across the financial markets, driving investors into the safety of the US dollar, Japanese yen and gold,” according to Kathy Lien of BK Asset Management.

At one point of trading the UK pound drop to $1.2798, its lowest level since June 1985, before it recovers. The British currency dropped 1.0% against the euro at 85.88 pence.

The euro strengthened slightly against the dollar, up 0.2% at $1.1097.

“The eurozone is hardly sheltered from the UK’s troubles and there could be a banking sector crisis brewing in Italy but for now, the greater concern is clearly Britain,” Lien said in a client note.

The dollar was little moved by the minutes of the Federal Reserve’s June 14-15 policy meeting, which showed Fed officials divided over US growth prospects as they kept rates on hold.

Omer Esiner of Commonwealth Foreign Exchange said the dollar stands to benefit from continued aversion to risk, but that the outlook for the Fed leaving rates unchanged through 2016 was likely to keep its upside limited.

“Even upcoming economic data, like the all-important payrolls report for June this Friday, may have a limited impact on the dollar as the Brexit story continues to dominate market focus,” he said.

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