Sterling drops as polls and punters signal victory for 'leave' campaign, Irish CEOs fear the worst from exit - PwC survey
Published 07/06/2016 | 02:30
Sterling dropped to a three-week low and the cost of protection against swings in the currency hit the highest level since the financial crash in 2008 as polls point towards a victory for the leave side in the vote on Britain's EU membership.
At home, a survey of chief executives recorded near universal concern at the prospect of the United Kingdom voting for a so-called Brexit on June 23.
An overwhelming 93pc of Irish ceos see it as the top threat for their businesses and just 3pc of Irish business leaders regarded the possibility of a Brexit as positive, according to PwC's 2016 Irish CEO Pulse Survey released today.
PwC's managing partner, Feargal O'Rourke, said the near unanimity among Irish business chiefs is almost unique, and reflects the fact that this country will be among the most affected by the UK vote.
He dismissed suggestions that Irish gains in financial services and other areas would outweigh losses. "I don't see any overall upside, if anything there will be significant downside," he said.
The accountancy firm joined other business leaders, including Michael O'Leary of Ryanair, to advocate a remain vote, and is targeting its message at the British in Ireland and Irish people living in the UK. "We believe that our economic future is best secured through continued shared membership of the European Union," Feargal O'Rourke said.
"We encourage business leaders to engage in and influence the debate, where appropriate. Irish companies employ a significant number of people in the UK and it is important that those Irish employers engage and outline the consequences for their own organisations of a Brexit vote."
With just over two weeks to go, polls published yesterday gave the leave campaign a lead.
Sterling fell on the news, down 0.3pc on the day at $1.4465 (£1.0), having fallen as far as $1.4352, its lowest for three weeks, in early Asian trading. It recovered in afternoon trade in London as the dollar came under pressure before a speech by Fed chair Janet Yellen.
The euro gained 0.3pc to 78.55 pence. Yesterday's poll was the latest showing momentum favouring Brexit. Many investors had expected to see support slip away from the anti-EU side as the vote neared.
"The polls are likely to make people rather uneasy and we can see that quite clearly today in the pound," OANDA senior market analyst Craig Erlam said.
"With both sides likely to step up their game over the next couple of weeks, I imagine we'll see a lot more volatility in the pound and the closer the polls get, or if 'Vote Leave' continues to push ahead, the pound may find itself back towards April's lows before too long."
Reflecting market nerves, one-month implied volatility - a measure of how sharp swings in the sterling/dollar exchange rate will be - last stood at 22pc, its highest since December 2008, according to Reuters data.
Spread-betting firm IG Group said yesterday that its clients are now staking more money on Britain voting to leave the EU than remaining for the first time since the market was created at the start of this year.
Currency volatility has become a big challenge for Irish exporters, who in many cases are price takers in the British market. The spike in the price of hedging means business that have not yet hedged may now find the cost of currency protection prohibitively expensive.
"The longer the medium to long-term prospects of the UK remain uncertain following a possible Brexit, the more likely it would be for the British current account deficit - the third largest in the world - to become an issue for the FX market, with the resulting risk of sterling collapsing," Commerzbank currency strategist Ulrich Leuchtmann said.