Pound plunges to 30-year low on UK vote to leave European Union

Confirmation that the UK had voted to leave the European Union (EU) sent the sterling pound plunging to $1.33– its weakest level against the dollar in about 30 years.

The Euro also tumbled to $1.09, its lowest since May, according to news reports.

At 51.7 percent– or about 17.4 million– votes, results of the referendum showed a clear win on Friday morning for the Leave camp, whose senior members already called a victory, according to news reports.

The historic referendum is expected to create a wave of political and economic uncertainty in the country and the wider 28-nation bloc.

Support for the Remain campaign was highest in London and Scotland, while cities like Sheffield, Sunderland, and Canterbury voted in favour of a Brexit, UK media reported, adding that the result will trigger a process of British withdrawal from the EU and also a possible referendum for an independent Scotland.

Analysts warned of uncertainty across international markets as the Brexit decision is expected to trigger volatility worldwide.

"Due to the far-reaching impact of this vote, Brexit will inevitably affect the British and the European economies and the wider global financial markets," said Nigel Green, founder and CEO of financial consultancy deVere Group.

“Investors around the world on Friday will pile into safety and prompt a significant shift in global markets from risky assets to safe havens,” he said, adding that uncertainty lingers for the world’s currencies, equities, and bonds in the short term at least.

“For instance, the FTSE will tumble, the pound is already in free-fall, and investors will be gearing up for probable shifts in the Swiss Franc, to the price of gold, and to monetary policies globally,” he explained.  

However, investors can cash in on buying opportunities arising from volatility “created by markets overreacting,” Green added. “They will, understandably, be seeking high quality equities, amongst other assets, that have become cheaper so that they might top up their portfolios and/or take advantage of lower entry points, which means greater potential returns.”

For investors from the Gulf, the weakened British pound following the Brexit vote can make the UK a more attractive destination, but “investors are likely to stay at bay for a time, while the dust settles,” the National Bank of Kuwait said in a research note earlier this week.

The overall impact of the Brexit referendum on markets in the Middle East and North Africa (MENA) region is likely to be limited, though stocks are expected to remain volatile in line with global equities, according to Dubai-based Emirates NBD.

“The GCC asset markets can only stand and watch as global events unfold,” Gary Dugan, chief investment officer at Emirates NBD, wrote in a note to investors.

“The DFM (Dubai Financial Market) for example has largely traded sideward since March. Should global equity markets fall sharply, then local markets could be dragged down with the DFM facing a break below 3200, to 3000, and at worst 2600,” he added.

Oil prices, meanwhile, could face downward pressure if Britain opts to leave the EU, as the ongoing political uncertainty is likely to affect demand, said Simon Kitchen, head of strategy research at EFG Hermes.

Write to Jerusha Sequeira at jerusha.s@argaamnews.com