Negative Forecast for Pound Sterling (GBP) on Brexit Fears from BoE

Modified: Wednesday, 23 March 2016 16:48 BST - Written by John Cameron

STORY LINK Negative Forecast for Pound Sterling (GBP) on Brexit Fears from BoE

The Pound has been soft against almost all of its rivals today, owing to a Bloomberg report that the Bank of England (BoE) and the nation as a whole are set to continue panicking about the UK Referendum as the vote date draws ever closer.

UK Pound Struggles despite Moody's Claims that a 'Brexit' Would Not have a Huge Impact on UK PLC

Leading credit agency Moody’s sent out a mixed message regarding the potential effect of a UK exit from the European Union in a report issued earlier this week. On the positive side, Moody’s forecast that, in real terms, a ‘Brexit’ would not materially affect the performance of UK PLC; the report predicted that, ‘our central view is that the negative economic impact of Brexit would be relatively small.’

The Credit Ratings Agency went on to state that it did not expect a Brexit to trigger, ‘significant increases in unemployment or interest rates, or substantial declines in property prices across the UK as a whole. We expect that, over time, the UK and EU would come to an arrangement to preserve most - but probably not all - of the current trading relationships, thereby limiting the impact on UK exporters and supply chains of UK importers.’

However, Moody’s added a caveat to its go-ahead forecast for a Britain outside of the European Union by expressing fears about the effect that uncertainty following a ‘leave’ result for 23rd June vote might have on UK economic confidence. The warning from Moody’s was clear –

‘A decision for the UK to exit the European Union ('Brexit') would result in prolonged uncertainty and would be credit negative for UK-based companies such as the auto, manufacturing, food and beverage, and service sectors. Many companies would likely curb investments until the implications of a Brexit become clear for trade, investment, regulations and labour costs.’

Brussels Attacks Weigh on Sterling Demand, GB Outlook Negative

Elsewhere, the Pound Sterling was the worst performing of the sixteen most actively traded global currencies in the wake of the Brussels terrorist attacks yesterday. Athanasios Vamvakidis of Bank of America Merrill Lynch explained that, ‘any events that could give, to some people, arguments against migrants and refugees - such as a terrorist attack - could increase ‘Brexit’ risks.’

Whichever way you look at it, the short-to-medium forecast for the Pound Sterling now appears negative.

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TAGS: Pound Sterling Forecasts