Sterling dips 11% to $1.3224 on ‘Leave’ Brexit vote

The decline of the sterling, which initially went down to US$1.4550 on news that the “Leave” was heavily favoured by voters in Sunderland City, continues. With the results of the historic divorce from the European Union out with a narrow lead for the exit, the pound suffered a stunning slide on Thursday breaching the $1.35 level at 3:40 am London time.

The 11 percent drop to that level last happened 31 years ago during the Thatcher-Reagan Era. By 4:40 am, the sterling further hit a new low of $1.3224, reports Financial Times. Commenting on the weakening British currency, Jeremy Cook, chief economist at World First, a payments company, says, “The usual caveats exist about liquidity but these moves are concerning and bring back pretty painful memories of 2008.”

Besides the beating that the pound took, the euro also declined by more than 3 percent against the dollar, while European shares opened 6 to 7.5 percent lower, reports Reuters. It adds “divorce proceedings” would take at least two years, place a question mark on London’s role as a global financial hub and pressure Prime Minister David Cameron to resign even if he said during the campaign he would stay.

Labour urged Cameron to seriously consider his position, while Ukip leader Nigel Farage, who claimed victory with 52 percent “Leave” votes, says, “dawn was breaking on an independent United Kingdom,” quotes the Independent.

AAP reports that the results of the Thursday referendum could lead to other members of the regional bloc holding referendums, resulting in a looser EU. Before the referendum, EU President Donald Tusk warned the Brexit could cause the “destruction of not only the EU but also of Western political civilization.”

Besides the sterling’s plummet, oil prices also dropped by 6 percent, reports The Wall Street Journal. But Fortune writes that while the pound could take a beating, the scenario of a full Brexigeddon is unlikely. It explains that although polls indicate only 28 percent of American are aware of what Brexit is, chances are the numbers would increase with Britain’s exit from the EU.

Amid worries by some economists the Brexit would result in a currency crisis, its impact on the US economy would be limited, but the resulting turmoil in financial markets could negatively impact American investors and policy decisions of the Federal Reserve. Fortune points out that in 2015, the US exported only $56 billion to the UK, a drop in the bucket for the thriving economy which produces $18 trillion worth of goods and services annually.

VIDEO: Queues to exchange sterling ahead of Brexit result