Rachel Holdsworth has the “Brexit” blues. The 38-year-old London resident is anxious that her already expensive planned holiday to Norway is getting pricier with each passing day. The pound is sinking under the weight of worry that her fellow subjects will vote to quit the EU.
“How much I pay will be entirely dependent on the exchange rate,” says Holdsworth, who will travel in May. “Norway’s not cheap at the best of times.”
Her distress is shared by other Britons slogging through winter as their thoughts turn to summer vacations. Sterling has fallen against every developed-nation rival this week, raising the price in pounds of everything from Mickey Mouse hats at Florida’s Disney World to a glass of Cote Rotie in Paris to a Kayak trip in the Norwegian fjords.
The pound has sunk to its weakest since 2009 against the dollar and is almost 12 percent below its five-year average. It’s still about 2 percent stronger than its five-year average versus the euro.
“If you are anything like me and have a U.S. holiday already in the diary then you are hoping that the near-term turmoil recedes sooner rather than later,” said Jeremy Cook, chief economist at the London-based currency exchange firm World First U.K. Ltd.
It may not — at least not until summer officially begins. The referendum on the U.K.’s EU membership is set for June 23, suggesting even a vote for remaining would come too late for the pound to recover its losses by the time traveling begins in earnest.
The pound is the worst performing major currency against the dollar this year, tumbling more than 5 percent. Traders are betting that even more extreme price swings are to come, pushing a gauge of volatility to the highest level since 2010.
If voters reject EU membership, the world will get even costlier for pound-earners. Most don’t see the pound recovering the bulk of its losses even by the autumn.
The debate “creates a tough backdrop for summer 2016 U.K. leisure travel,” HSBC Holdings Plc strategists said in a report.
On the other hand, the 400 million-plus residents of the other 27 EU countries would find it cheaper to ride in the London Eye or take in a West End show. The weaker pound will “certainly make London a more attractive city-break destination for shopping and culture for passengers from Europe,” said EasyJetPlc spokeswoman Anna Knowles.