Pound Sinks to Seven-Year Low

7 percent higher, with the Paris CAC 40 1.

United Kingdom justice minister Michael Gove, long a Cameron ally but now advocating an exit from the EU, said Britain’s deal on new terms for membership could be undone by the European Court of Justice despite support from all member states.

The British pound traded near $1.39 for the first time in seven years on Wednesday, while the cost of hedging against sharp swings jumped to their highest in more than four years as concerns that Britons could leave the European Union deepened.

It later regained some ground but the currency was again under pressure in the following session, hovering below $1.41 – and was also lower against the euro.

“There are very few people willing to take the other side of the move lower”, said Josh O’Byrne, a strategist at Citi.

“Beyond $1.3950, the next area of supports converge around $1.3500- $1.3680 (2001 and 2009 lows), they said”.

“That is not the question in this referendum”.

Banking heavyweight HSBC was the top faller after reporting weak results and confirming that it was under investigation by United States regulators in relation to its hiring practices of people tied to government officials in Asia. See MNI Main Wire at 1:36 a.m. ET.

Speaking at the House of Commons Treasury select committee, Mr Carney declined to speculate on the consequences of a Brexit but said the bank was watching for any impact of fluctuations in the value of sterling on economic activity.

HSBC has also warned that sterling could see its value plummet by a fifth if the United Kingdom votes to leave the EU. The pound has fallen nearly 3 percent in as many days, putting it on track for its worst week in during David Cameron’s six years as prime minister, following a weekend during which several senior members of his Conservative party threw their weight behind the campaign to leave Europe. This could happen as soon as the day after the vote, he said.

Now, with the June referendum looming and the polls showing a neck and neck race, market players have been debating how low sterling could go. “Regardless of the outcome, the United Kingdom should remain a flexible and dynamic economy”.

The pound may tumble immediately after a vote to quit the European Union, but would likely recover some of its losses, said Peter Dixon, a London-based economist at Commerzbank AG. “With traders already pushing back bets on the timing of a Bank of England interest-rate increase, the prospect of Britain leaving the world’s largest single market had been causing further concern, helping push down the pound against most of its Group-of-10 peers this year”, reports Eshe Nelson for Bloomberg.

At present, foreign exchange markets were pricing in a roughly 33% probability of a Brexit, but should that crystalyse into certainty (a 100% chance) it could push the pound down by between 15-20% versus the U.S. dollar – down to early 1980s levels – and towards parity with the euro in the aftermath of a “Brexit” vote.