The pound plummets as Boris backs Brexit

23 February 2016 - 02:17 By Bloomberg

The pound fell the most since the UK's 2009 banking crisis after London mayor Boris Johnson, one of the nation's most popular politicians, said he would campaign for Britain to leave the EU in the June referendum. Sterling dropped to its lowest level in almost seven years against the dollar, and weakened at least 1% against all its 16 major peers.The move reversed a gain made on Friday when Prime Minister David Cameron secured a deal on membership with EU leaders.Gauges of pound volatility versus the dollar and euro surged to the highest levels since 2011 as Johnson's backing of a "Brexit" pitted him against the prime minister, who said he would fight to keep Britain in the bloc at the June 23 vote."The pound is tumbling after the deal clinched by Cameron at the EU summit failed to alleviate fears about Brexit," said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA's corporate and investment-banking in London. "The fact that prominent members of the Conservative Party announced they will campaign for Britain to leave the EU likely underscored investors' concerns that Brexit risks could increase from here despite the deal."The pound dropped 2.1% to $1.4107, set for the biggest decline since March 2009.Sterling weakened 1% to 78.08 pence per euro. Although the announcement of the date removes some ambiguity, traders now face months that may boost volatility.With traders pushing back bets on the timing of a Bank of England interest-rate increase, the prospect of Britain leaving the EU had been causing further concern, helping push down the pound against all of its Group-of-10 peers this year. ..

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