BLOOMBERG POLL The Brexit could cause the GBP exchange rate to drop to its 1985 level

ALINA VASIESCU (translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 25 februarie 2016

The Brexit could cause the GBP exchange rate to drop to its 1985 level

A potential exit of Great Britain from the European Union (Brexit) could affect the exchange rate of the sterling, according to a poll made by Bloomberg, which shows that the currency of this country could drop to 1.35 dollars or even lower, within a week from the vote to leave the EU. Such a level has never been reached since 1985.

The Bloomberg analysis was conducted on a sample of 34 economists, and 29 of them anticipate the aforementioned evolution. Also, 23 of the polled economists think that the pound will not recover from the 1.35 level earlier than three months after the Brits' vote on the EU exit, scheduled for June 23rd. Seven of the polled specialists think that the British currency will drop below 1.20 dollars immediately after a vote in favor of the Brexit.

The pound has already lost over 2% in 2016, compared to the currencies of the G10 countries (the Group of the ten most developed countries in the world), as the unequal economic recovery and the increasingly weaker outlook for the hike of the policy rate join the fears of a possible exit of Great Britain from the EU. The depreciation is increasingly pronounced after prime-minister David Cameron announced on Saturday the date of the referendum and some politicians decided to launch campaigns for leaving the EU.

"A Brexit vote will affect the pound sterling heavily", said Nick Kounis, head of the macroeconomic research division of "ABN Amro Bank" NV of Amsterdam.

He predicts the pound sterling going below 1.20 dollars a week after a potential vote in favor of the Brexit.

Peter Dixon, an economist with "Commerzbank" AG, the London branch, predicts that the pound sterling will fall to 1.25-1.30 dollars a week after a potential vote in favor of the Brexit.

American bank "Goldman Sachs Group" Inc. also warns that the pound could drop 20% in the event of a Brexit, as does British giant "HSBC Holdings" Plc. HSBC mentions: "A vote in favor of the Brexit could have major consequences for all classes of British assets. Following such a vote, we believe that the uncertainties could affect the British economy, causing a potential growth slowdown and the collapse of the pound".

Enrique Diaz-Alvarez, risk manager with London brokerage firm "Ebury Partners", thinks that the Bank of England will cut the interest rate in the event of a Brexit. Currently, the interest rate is at a historic low: 0.5%.

The pound fell yesterday, on the European market, to its lowest level since March 2009: 1.3925 dollars. At 10:46, on the American market, the British currency reached 1.3948 dollars.

British Social Attitudes: 22% of the British want the country to leave the EU

According to a poll conducted by British Social Attitudes, British voters are skeptical when it comes to the benefits that the country will have if its stays in the European Union, but they are afraid of leaving the bloc. The analysis conducted between July and November 2015, on a sample of 1,105 adults, shows that only 22% of the Brits want the country to leave the EU, and 43% want the EU powers to be reduced. Thus, 65% of those polled are Eurosceptics, and they can be potential targets of the campaign which favors the Brexit.

The study mentions that when asked to choose strictly between "yes" and "no", the respondents has decided in favor of staying in the EU.

24% of the study participants think that the British economy will have an improved evolution if it leaves the EU, whereas 40% think that the situation would get worse.

The International Monetary Fund (IMF) yesterday informed that the British economy is seeing constant growth, and the turnaround has been caused, last year by the growth of private demand in the country. The IMF estimates that this year, Great Britain's economy will see a growth of 2.2%, similar to the growth rate estimated for last year, but also for 2017.

Great Britain would put in question exports of food products of 11 billion pounds (16 billion dollars) if it were to vote for the EU exit, British Agriculture Minister Elizabeth Truss warned, according to Bloomberg.

The European Union provides access to a market of 500 million consumers and is responsible for approximately 60% of the exports of agricultural and food products of the EU community states, said Elizabeth Truss, according to Agerpres.

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