Sterling headache for Irish exporters as Brexit vote nears
Published 08/06/2016 | 02:30
Irish exporters to the UK are facing continued headaches from a weakening sterling as the Brexit vote enters its final weeks.
Sterling has fallen in value significantly as the risk of a British exit from the European Union increased.
Bank of Ireland head of global customer group John Moclair explained the threat a weak pound poses to Irish exporters.
"The recent weakening of the pound will be of concern to Irish firms exporting to the UK, as it erodes the competitive advantage that a weak euro delivers.
"The potential consequences of a 'leave' vote, including a depreciation in sterling, would be of concern for Irish exporters," Mr Moclair said.
He said Irish firms will be watching the outcome of the June referendum closely.
"For those concerned about volatility in sterling, proactively hedging currency risk continues to be the prudent strategy," he said. Polls have been fluctuating over whether the British electorate will vote in favour of a Brexit.
Uncertainty around the decision has left Irish exporters on edge.
A new PwC survey of Irish chief executives showed that 93pc sees a Brexit as the top threat to their business.
According to the PwC Irish CEO Pulse survey, just 3pc of business leaders see the possibility of a Brexit as a positive to their company.
Meanwhile, sterling bounced about 0.5pc against the euro and dollar yesterday after two new opinion polls gave a narrow lead to the 'remain' camp ahead of the June 23 referendum on Britain's EU membership.
The pound had sunk to a three-week low in trade-weighted terms on Monday after a pair of online opinion polls gave the "leave" camp a 4-5pc lead.
Dealers said a generally weaker tone to the dollar since shocking US jobs data on Friday has also helped.
"The two polls overnight have lent support to the pound early in today's session," said Craig Erlam, senior market analyst with currency brokers Oanda in London.
"With momentum, though, very much with the 'leave' campaign, it would appear, at least from the recent polls, that there is a very real chance that the UK could vote out, which could play havoc with the market," Mr Erlam added.
The cost of protection against swings in the currency over the next month hit its highest since late 2008 on Monday on concern that support for Britain leaving the EU is growing among the public.
It inched higher still, to 22.2pc, yesterday.
Bookmakers have shortened their odds, with betting website Betfair putting the chances of a vote to leave at just over 30pc, little changed from Monday.
Odds at the end of last week had implied a 27pc chance of Britain leaving the bloc.
Sterling was last up 0.6pc on the day at $1.4524 , having fallen as far as $1.4352 on Monday.
It remains way above long-term lows around $1.38 hit as the Brexit campaign properly got under way in February.
The euro, meanwhile, fell 0.5pc to 78.23p.
"The debate is getting long, loud and messy," said Tobias Davis, head of corporate treasury sales at Western Union in London.
"But the pound has bounced off its recent sub-1.44 lows to trade comfortably above 1.45 this morning in light of a weaker dollar," Mr Davis said.
(Additional reporting from Reuters)