LONDON (Reuters) - Sterling could fall to parity with the euro if Britain votes to leave the European Union in June, analysts from Swiss bank UBS said in a note laying out scenarios for the vote and its aftermath. EURGBP=D4
Assigning a 40 percent chance to a “Brexit”, UBS also said that the pound could rise back to levels around 73 pence per euro seen last year before the EU debate began to have an impact on sentiment towards UK markets.
They said the parity forecast was based on the devaluation required to reduce Britain’s high - 4.7 percent of GDP - current account deficit back to long-term averages around 2 percent.
“In our view, the largest part of the weakness in sterling since November can be attributed to increased concern over the possibility of exit from the EU,” the bank said.
“In the near-term, we forecast the euro to rise to 0.84 pence and sterling falling to $1.36, reflecting the weighted probability of Remain/Leave scenarios.”
Reporting by Patrick Graham, editing by Anirban Nag