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Sterling continues to fall in referendum aftermath

Monday, Jun 27 2016
Worries over the aftermath of Britain’s decision to quit the European Union continued to influence the financial markets on Monday. Sentiment remained weak, with a political crisis gripping Britain and no clarity about when the world’s fifth-largest economy would leave the EU or on what terms. But the moves on Monday were nowhere near as extreme as on Friday, when global stocks suffered their biggest decline in nearly five years.
The pound recovered some of its lost ground after British Finance Minister George Osborne said the government had robust contingency plans in place and that it and the Bank of England could do more if needed. Given all the uncertainty, investors were pricing in a chance of a rate cut with some analysts expecting the Bank of England to consider quantitative easing to cushion the economy.
 
Many economists have cut growth forecast for the UK. Goldman saw Britain entering a mild recession within a year due to deterioration in its terms of trade, scaled-back investment and tighter financial conditions because of exchange rate fluctuations, and weakness in risk assets.
 
Sterling is currently being traded few points above 1.32 level. Pair is likely to find support around 1.31 handle and resistance above 1.34 level.
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