London - The pound gained for a second day, rebounding from the lowest level since 2009, as traders weighed the prospect of Britain leaving the European Union and the impact on the economy.
Sterling has still tumbled 2.8% since last Friday, putting it on course for its worst week since May 2010, when an inconclusive general election led to the formation of the UK’s first post-war coalition government. The currency also strengthened for a second day versus the euro, after sinking this week to a 14-month low.
“There’s a point where you have to decipher whether market pricing of a ‘Brexit’ has gone too far or not,” Nomura International currency strategists Jordan Rochester and Yujiro Goto wrote in a note. “With FX option pricing implying high probabilities of a further 10% to 15% fall in pound- dollar, it feels like in the short term we’ve perhaps reached a peak of ‘Brexit Pessimism.’”
The UK would face a “profound economic shock” if it voted to leave the world’s largest single market in the June 23 referendum, Chancellor of the Exchequer George Osborne toldBBC Television on Friday. The finance chief backs staying part of the EU alongside fellow Conservative Prime Minister David Cameron.
Reluctant skeptics
While the issue is hurting everything from consumer confidence to the housing market, a “Brexit” is by no means assured. A study published this week showed most voters are skeptical about the advantages of the bloc, but reluctant to leave.
The pound rose 0.3% to $1.3998 as of 12:40, after dropping to $1.3879 on Wednesday, the lowest since March 2009. It gained 0.3% to 78.67 pence per euro.
A level of $1.39 may come to be seen as having been “a good long-term buying opportunity for a country that, in a high likelihood, will vote to stay in the EU,” the Nomura analysts wrote.
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