UK launches devaluation: Pound falls most in 11 months

Baku. 22 February. REPORT.AZ/ The pound fell the most since May 2010 after London Mayor Boris Johnson, one of the U.K.’s most popular politicians, said he’ll campaign for Britain to leave the European Union in a June referendum, Report informs referring to the Bloomberg.

Sterling dropped at least 1.2 percent against all its 16 major peers, reversing a gain made on Friday when Prime Minister David Cameron secured a deal on membership terms with EU leaders in Brussels. The next day, Cameron said he would fight to keep Britain in the bloc, and set a June 23 date for the vote. Gauges of pound volatility versus both the dollar and euro surged to the highest level since 2011 as Conservative MP Johnson backing of a so-called ’Brexit’ pitted himself against the prime minister.

“The pound is tumbling after the deal clinched by Prime Minister Cameron at the EU summit failed to alleviate fears about Brexit,” said Valentin Marinov, head of Group-of-10 currency strategist at Credit Agricole SA’s corporate and investment-banking unit 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 1.7 percent to $1.4163 as of 9:20 a.m. in London, set for the biggest decline since the day of the U.K. General Election on May 6, 2010. While the currency is down 3.9 percent this year, it remains above an almost seven-year low of $1.4080 reached in January.

Sterling weakened 1.2 percent to 78.24 pence per euro. Although the announcement of the date removes one aspect of ambiguity for traders, they now face months of polls and campaigning that may boost volatility further. With traders already pushing back bets on the timing of a Bank of England interest-rate increase, the prospect of Britain leaving the world’s largest single market had been causing further concern, helping push down the pound against all of its Group-of-10 peers this year.

“The pound’s weakness is a product of uncertainty of the U.K.’s ongoing membership of the union, not the timing of the poll,” said David Page, a senior economist at AXA Investment Managers in London. “Weakness is likely to reflect any increased perception of the likelihood to leave and as such is likely to be a constant feature over the coming months.”

Analytical Group of Report News Agency believes that various countries of the world, including England make such statements to devaluate their national currency. Against the background of current global economic conditions, devaluation war continues. Therefore, further strengthening of the US dollar, USD/EUR reach of parity, fall of exchange rate of pounds sterling to 1,35 USD/GBP are expected.