Sterling inched up 0.2 percent to $1.2949 and 0.4 percent to 85.48 pence in early trade in Europe.
Advertisement
“There’s a lot of nervousness in the sterling market”, said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt.
Governor Mark Carney said pre-referendum warnings about what might happen in the event of a Brexit vote had “begun to crystallise” – including a hit to commercial property – and that the United Kingdom “has entered a period of uncertainty and significant market adjustment”.
The pound has now fallen by about 14% against the dollar since hitting $1.50 ahead of the referendum result.
The Brazilian real has barely budged against the dollar since June 23 while the Turkish lira and the South African rand have only lost 3 per cent in stark contrast to the much sharper falls in EM currencies in the days and weeks following the decision by the US Federal Reserve in late May 2013 to wind down its programme of quantitative easing.
The big fear around European banks is that Brexit “could cause a domino effect of other countries leaving”, AMP chief economist Shane Oliver told The New Daily.
“Carney’s speech seems to have initiated the dawning of realisation of the longer-term impact of Brexit for many in the markets”.
In its biannual report the BoE highlighted a number of risks emanating from the vote to leave the EU, including a hit to the commercial real estate market from the possible relocation of banking jobs to other European cities.
Japan’s benchmark Nikkei 225 has dropped almost 3% and the broader Topix has shed 2.6% as the yen, another safe haven investment, strengthened against the USA dollar. By doing so, the funds are trying to prevent a vicious cycle of selling that could force them to dump assets at ultra-low prices, deepen losses and prompt more investors to rush for the exit. Stocks have been shaky, and shares in some British real estate companies have shed more than third of their value. US stocks continued to fall early Wednesday, July 6, 2016, as investors snap up bonds.
The bookmakers also predict that it will be May who is most likely to be the next British prime minister.
Markets look next to Friday’s USA non-farm payrolls report, analysts said.
Fears of instability in the European Union and prolonged global stagnation sent stock markets sharply lower on Wednesday as Britain’s pound sank below $1.30 for the first time in more than three decades and US Treasury yields again hit historic lows. That’s good news for USA consumers traveling to Europe, he noted, but it’ll pinch not only exports but also American companies’ bottom lines when they repatriate earnings from Europe and elsewhere back home. The Nasdaq composite lost 39.67 points, or 0.8 per cent, to 4,822.90. After settlement, oil jumped more, when the American Petroleum Institute reported US crude and refined product stockpiles fell 6.7 million barrels.
Advertisement
Banks have also suffered heavy share price falls, as following Brexit, Britain risks no longer being considered as the gateway to Europe for USA and Asian banks, while thousands of jobs are at risk of being relocated overseas.
