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Expert comment on the volatility of Sterling PDF Print E-mail
Tuesday, 14 June 2016
Daniele Bianchi, of Warwick Business School, is an Assistant Professor of Finance and researches Empirical Asset Pricing, Commodity Markets and Financial Econometrics. He said: "The volatility on the sterling exchange rates against other major currencies is likely to get worse as the political debate becomes more intense and the polls become tighter. Such uncertainty in itself represents something undesirable for investors and business, which in such a volatile environment are likely to hold hiring, investment and spending decisions; all these things will negatively affect the economy in the short-term.

"Should the UK Brexit in the referendum the most likely scenario is that sterling could lose around 15% of its current value against major currencies such as the dollar, and around 10% against the euro. In the short-term this could substantially increase inflation from imported goods which could outweigh the positive effects of more competitive exports as the UK currently runs a negative gap in the balance of trade against Europe. A steep rise in inflation could force the Bank of England to raise interest rates potentially affecting mortgages and ultimately the housing market."

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