Pound Below $1.39 On EU Vote Uncertainty

The pound remained on the ropes on Wednesday, slipping to fresh lows not seen for almost seven years as the EU referendum campaign shakes the currency's appeal among investors.

Financial analysts cited uncertainty over the looming vote and also renewed worries about the global economy.

The slide in the pound's value began when financial markets opened on Monday after David Cameron announced a date of 23 June for the EU vote.

Sterling slipped to $1.38.8 on Wednesday - its weakest level against the dollar since March 2009.

It had already endured a pummelling on both Monday and Tuesday after Tory heavyweights led by Boris Johnson came out in favour of the UK leaving the EU.

Sterling was also lower against the euro while stock markets were down too - the FTSE 100 (NasdaqGS: Z - news) shedding 1.5% by lunchtime as oil prices fell back again.

Phil McHugh, trading floor manager at Currencies Direct, suggested the pound's weakness could not only be blamed on the EU vote.

He said: "Unsurprisingly, the concerns for the global economy have continued to have disastrous consequences for the pound, which often performs poorly in a risk-off environment".

Polls suggest the referendum could go either way - given the numbers of people said to be undecided.

At an appearance before MPs (BSE: MPSLTD.BO - news) on Tuesday, Bank of England governor Mark Carney acknowledged that uncertainty about the outcome was fuelling instability for the pound - last seen around the run-up to the Scottish independence referendum in 2014.

He said the Bank was doing contingency planning for the aftermath of the vote, but he said it was "not making a judgement" on the outcome or consequences of the vote.

Gertjan Vlieghe, a member of the Bank's rate-setting Monetary Policy Committee, said uncertainty could feed through to households and businesses, possibly delaying or reducing spending, though there was not yet any clear evidence of this.

However, Vicky Redwood, chief UK economist at Capital Economics, said the fall in sterling "should not be viewed as an entirely negative development, as the much longed-for rebalancing of the economy probably requires a significantly lower exchange rate".

A weaker pound helps Britain's beleaguered exporters because it makes their goods cheaper abroad.

It also means UK holidaymakers preparing for an Easter break face higher costs because their money will not go as far when they are buying euros on the Costa del Sol (LSE: 0NJP.L - news) or dollars in Florida.