£ plunges amid Brussels tragedy, Brexit fears

epa05175546 British Pounds in London, Britain, 22 February 2016. Sterling suffered its worst fall in over a year over fears that Britain might decide to leave the EU.  EPA/ANDY RAIN


The pound posted the biggest decline among major currencies amid speculation the Brussels explosions will boost the case of campaigners who want Britain to quit the European Union.
The tragedy risks making sterling into even more of a political football as the debate over a potential “Brexit” rages. Anti-EU politicians have argued that migration leaves the U.K. vulnerable to terrorist attack, while figures in the opposing camp, including Prime Minister David Cameron, say being part of the economic and political union makes the country safer.
“The most negative reaction is for GBP,” Athanasios Vamvakidis, head of Group-of-10 currency strategy at Bank of America Merrill Lynch in London, wrote in e-mailed comments. “Any events that could give, to some people, arguments against migrants and refugees — could increase ‘Brexit’ risks.”
The pound is already trailing other currencies this year amid speculation a June vote to leave the world’s biggest single market would set back the nation’s economic recovery.
terling fell Tuesday by the most among 17 major peers tracked by Bloomberg, sliding 0.6 percent to $1.4279 and 0.4 percent to 78.51 pence per euro as of 10:38 a.m. London time.

‘Clearly Underperforming’

“Sterling is clearly underperforming today,” said Valentin Marinov, head of G-10 foreign-exchange strategy at Credit Agricole SA’s corporate and investment-banking unit in London. “I think it’s on the back of a combination of factors — one of which is the concern that the tragic event could indeed support the campaign to leave the EU.”
Iain Duncan Smith, who resigned as a minister last week, warned in February that being part of the EU makes Britain more exposed to attacks from militants given the recent “massive wave” of migration.
Belgian Prime Minister Charles Michel said that Tuesday’s explosions, reported in Brussels airport as well as its subway system, are being treated as possible terrorist attacks.
“An event like this increases the risk of an ‘out’ vote at the referendum,” said Mujtaba Rahman, director of European analysis at the Eurasia Group in London.
“There is already a perception in London and elsewhere in Britain that Europeans are failing on terrorism and security.”

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