Sterling dragged down by Brexit fears after minister resigns

Posted On 22 Mar 2016

The British pound slid on Monday in reaction to the resignation of “Brexit” supporter and Works and Pension Secretary Iain Duncan Smith over the weekend. This highlighted a deepening rift within the ruling Conservative Party just three months before a referendum that will determine whether the UK will leave or stay in the European Union.

Political uncertainty has been weighing on the pound, which reached 7-year lows in late February, and the latest news is an added drag on the currency, which is currently trading below $1.44 against the dollar. The euro was 0.4 percent stronger at 78.15 pence.

Investors worry that a Brexit (UK leaving the EU) would hit growth and threaten the huge foreign investment flows Britain needs to fund its current account deficit, which is at about 4 percent of national output.

Sterling does not normally react strongly to UK politics so this is probably due to Brexit fears. The resignation of Iain Duncan Smith will simply add another layer of risk to sterling’s prospects.

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Source:: Sterling dragged down by Brexit fears after minister resigns

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