The UK pound to euro exchange rate remains at two month lows as anxiety surrounding a possible Brexit vote to leave the European Union sky rocketed. As of 08:00 GMT this morning, one UK pound exchanged 1.2555 euros, or 0.49% lower (GBP/EUR). The current 14 day average GBP/EUR exchange rate adjusts to 1.278.
Many currency traders are looking not only at Brexit but at a cocktail of other global economic events, including central bank updates and news of possible interest rate rises from the US Federal Reserve on Wednesday, together with the Bank of England’s monthly meeting on Thursday.
Analysts forecast that a vote to leave the EU on June 23rd would jolt Britain’s economy and send the pound tumbling by 15 to 20%, while a vote to stay would be likely to drive the British currency sharply higher.
With just nine days to go before the vote, the latest poll published on Monday by the Guardian newspaper showed Leave with a 6% lead over Remain, once the undecided have been excluded. The cohort of don’t knows has been shrinking, but it is still around 6%.
A Big Fall for the Euro Exchange Rate?
Its possible that a Brexit from the EU would see the UK pound falling against the US dollar and other major world currencies, however the euro may well end up the biggest loser of all.
Nick Parsons, Head of Markets Strategy, Europe, for National Australia Bank, believes that the UK pound to euro exchange rate will fall in the event of a Brexit vote, but a rapid recovery will be seen over subsequent days as markets quickly shift focus to the future of the European Union and the single currency, the euro.
“I think that the pound’s fall against the euro won’t last more than 24 hours. We could see the pound down at 1.20 (GBP/EUR) against the euro, but within a matter of course, days at most, I think we could be back up nudging 1.40 (GBP/EUR).” said Parsons.
Ireland Biggest Brexit Loser?
Meanwhile, according to a sensitivity report from US ratings agency Standard & Poor’s, Ireland will bear the brunt of a Brexit more than any other UK trading partner. According to the report, Ireland is the economy that will be most susceptible to any trade and migratory aftershocks from a decision by the UK to leave.
Ireland will feel the most significant reverberations to its economy, said S&P. “The uncertainty regarding Ireland’s new trade and migratory agreements with Europe would take its toll on flows of merchandise, services, and human capital, along the Republic of Ireland’s border with the UK.”
Malta, Luxembourg and Cyprus all follow closely behind in terms of effects to their economies should Brexit occur. Malta and Cyprus, both of whom enjoy historical relations with the UK, also benefit from high tourism and large expat populations from the UK to their countries.
“Their attractive climates have drawn a large population of British pensioners. Cyprus also has a very large expat population working in the UK, which pays an estimated 0.6% of GDP in remittances to Cyprus per year, the highest in Europe outside of the Baltics.” according to S&P.