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Pound plunges to 31-year low amid Brexit worries

Jul 06, 2016, 4:55 AM EDT
(Source: Victor/flickr)
(Source: Victor/flickr)

The pound sank to a record 31-year low against the dollar on Wednesday as fears of instability in the European Union continued to haunt global financial markets. The pound has dropped by about 14 percent against the dollar since it hit $1.50 ahead of E.U. referendum vote. The impact was visible in commodity markets as well where oil prices fell by five percent on Tuesday, which was followed by a drop in Brent crude futures within next few hours.

A number of factors fuelled pessimism among investors, writes the BBC. Three fund managers stopped investors from withdrawing money from their U.K. property funds, prompting the latest wave of “market nerves,” which was compounded by disappointing data on Britain’s service sector and a decline in U.S. factory orders.

Since Brexit vote, investors have been pinning their hopes on policy easing measures from major central banks while analysts warn that new steps could prove counterproductive and drive market volatility.

The financial foundations of Italy, the euro zone’s third largest economy, took a hit as shares in its banks tumbled, writes Reuters. Francesco Galietti, head of the Policy Sonar risk consultancy and a former finance ministry official, warned that Italy faces an immediate, “non-linear” crisis in its banking sector. 

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