The pound could slump into a “currency crisis” if Britain votes to leave the European Union on June 23.
In a short note, foreign exchange firm Caxton FX, notes that the effects of Brexit would set off a major downward spiral in sterling, owing to uncertainty in the markets, and worries about the future of Britain’s economy.
As Caxton analyst Nicholas Laser-Ebisch brilliantly, but rather strangely puts it: “There has been talk of a currency crisis if the UK leaves the EU, as investors would leave the UK investment market faster than a jack rabbit on a hot greasy griddle in the middle of August” should Britain vote to leave the EU.
On the other hand, Caxton predicts that if Britain chooses to stay in the EU, we’ll see the exact opposite, a massive spike of as much 15% in the value of sterling. Here’s Laser-Ebisch again:
A vote to ‘Remain’ in the upcoming EU referendum on June 23 could mean an end to sterling weakness. If the UK votes to remain as part of the European Union, we could see the pound appreciate rapidly in value. Sterling could gain 10-15% in a matter of weeks, once Britain’s place in the EU is solidified.
Sterling has fallen into a pretty hefty downward spiral in the past couple of week as uncertainty about Britain going forward and the economic effects of Brexit started to bite. On February 29, it slipped as low as $1.3844, a multi-year low. It has since recovered a little, and on Thursday, just after 12:30 p.m. GMT (7:30 a.m. ET) it is trading at $1.4078, pretty much flat against the greenback on the day.
Here’s how Sterling has performed in the past month: