However, on a longer time frame “Brexit” might be a positive, the economists said, “if it allowed the United Kingdom to “cherry pick” immigrants from all over the world and forge new trading partnerships”, HSBC added.
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Worries over falling oil prices and the possibility of a British exit from the European Union drove the euro to a three-year low against the yen on Wednesday and sterling to a seven-year trough against the dollar.
The pound dropped below the US$1.39 line, its lowest since late 2009, before pulling up slightly to US$1.3923, for a loss of 0.7 per cent in the day.
Deutsche Bank is bearish on the pound and forecasts a drop to $1.28 by year-end, Brehon said.
“A lot of the impact on the pound has already played out”.
The currency market has only priced in a 33 percent probability of a Brexit, HSBC explained.
However, in a blow to his leadership, Cameron’s Conservative Party colleague and London Mayor Boris Johnson backed the “leave EU” campaign, heightening fears about a British Exit or “Brexit” from the EU. BOE Governor Mark Carney will speak on Tuesday with lawmakers about the central bank’s quarterly inflation report released earlier this month. This could happen as soon as the day after the vote, he said.
Market participants don’t seem to be harbouring excessively high hopes for the meeting, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo. Officials would “cut back to zero, removing all chances of a hike in the immediate future”. It sank to a 14-month low of 79.07 pence per euro, and is at its weakest on a trade-weighted basis since December 2013.
Analysts at the FTSE 100 bank believe the pound could lose between 15% and 20% against the dollar and drift towards lows last seen in the mid-1980s, while it would move towards parity with the euro. He sees sterling above $1.25 and up to $1.30 a week after a vote to leave, and between $1.35 and $1.40 three months afterward.
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“And if the pound is going to fall sharply, now is as good a time as any; inflation is close to zero and likely to rise back to its target only slowly, while inflation expectations, if anything, need a boost”. Woodford’s suggestion that, from an economic perspective at least, it makes little difference whether the United Kingdom remains in the European Union or leaves, goes against conventional wisdom which dictates that the domestic economy will collapse would Brexit take place.
