Irish business chiefs are warned of export damage as sterling struggles
Published 23/02/2016 | 02:30
Irish businesses have been warned to expect volatility in the value of sterling in the coming months as the EU in/out battle ramps up in Britain.
The value of sterling took a battering against the dollar yesterday and fluctuated against the euro as the 'leave' camp was bolstered by the support of London Mayor Boris Johnson.
A weak pound against the euro is good news for Irish holidaymakers as they'll get more bang for their buck, but bad for Irish exporters looking to sell into the UK market.
Since November, the euro has jumped in value against sterling, rising from 70 pence on November 16, to 78 pence in recent weeks.
Currency experts believe the volatility will continue as the Brexit campaign intensifies further over the coming months ahead of the June 23 poll.
John Moclair, head of retail treasury sales at Bank of Ireland, said currency investors don't like the uncertainty posed by the vote.
"The pound dropped by over 1pc versus its peers on the opening of financial markets yesterday morning after London Mayor Boris Johnson's announcement that he will campaign for Britain to leave the European Union," Mr Moclair said.
"This was a further blow for sterling which has already fallen more than 5pc since the start of the year as global growth and inflation worries put the Bank of England's monetary policy firmly on hold, coupled with the risk of Britain leaving the EU.
"Since investors and businesses are always wary of any move that creates uncertainty and could hurt the economy, at least in the short term the pound will remain volatile as the ramifications of an unprecedented exit from the world's largest trading bloc continue to be digested."
The pound plummeted to a seven-year low against the dollar in the wake of Mr Johnson's announcement that he would push for Britain to leave the EU. The Mayor of London writes in today's Irish Independent that staying inside the European Union would lead to an "erosion of democracy".
Businesses and the world of finance are concerned about the prospect of a British exit from the EU, with the uncertainty posed by such a move cited as one of the biggest concerns.
There are also worries over its impact on Ireland, with the Economic and Social Research Institute warning that a withdrawal could see Irish-UK trade slump by up to a fifth.
Both Fitch and Moody's - two of the world's major ratings agencies - said yesterday that a 'Brexit' would have negative implications for the British economy and its standing among investors.
Concern over Britain's possible exit from the EU has been at the heart of a fall in sterling since November.
Justin Doyle, Dublin-based senior treasury dealer at specialist bank Investec, warned of potential sterling volatility to come.
"Irish companies with sterling exposure will be keeping a close eye on public sentiment in the UK towards 'Brexit' or, to coin a phrase, 'Britin'."