IMF Lagarde Warns UK About Brexit

The head of the International Monetary Fund thinks Britain should stay in the European Union, or both will suffer.

Christine Lagarde spoke out against a Brexit in an interview with CNNMoney on Wednesday. Trade and financial ties, and migration between Europe and the U.K., had boosted growth, she said.

“My hunch … is that it is bound to be a negative on all fronts,” Lagarde said. “For those that stay, because there are fewer of them, and for those who go, because they lose the benefit of [that] facilitation of exchange.”
The U.K. will hold a referendum on membership in the EU on June 23, and markets are becoming increasingly concerned about the impact on trade, jobs and investment if voters choose to leave the bloc of 500 million people.
The British pound fell to $1.39, its lowest level in seven years, on Wednesday.

HSBC analysts said a Brexit vote could send the pound crashing by 20% to levels last seen in the 1980s.

“Following a vote to leave, we think uncertainty could grip the U.K. economy, triggering a potential slowdown in growth and a collapse in sterling,” the bank said in a research note.

Lagarde said the consequences are already being felt.

“Uncertainty is bad in and of itself,” she said. “No economic player likes uncertainty. They don’t invest, they don’t hire, they don’t make decisions in times of uncertainty.”

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza