Pound plunges as Cameron makes pro-EU case in UK Parliament

Britain’s Prime Minister David Cameron addresses Members of Parliament

A vote to leave the European Union would be “a great leap into the unknown” at a perilous time for Britain and the West, Prime Minister David Cameron said, as uncertainty over the U.K.’s future in the bloc sent the pound plunging on currency markets.
As the political battle for Britain’s future entered high gear ahead of a June 23 referendum, Cameron told lawmakers that membership in the 28-nation EU boosted the country’s economy and security.
He told the House of Commons that in the face of threats including Russia’s muscle-flexing President Vladimir Putin and Islamic State group attackers in the Middle East, “this is no time to divide the West.”
“Leaving the EU may briefly make us feel more sovereign,” he said, but argued the U.K. would be “stronger, safer and better off” within the EU.
Cameron said a deal he struck Friday with 27 other EU leaders gives Britain “special status,” exempting the U.K. from ever-closer political bonds within the bloc and protecting the rights of the pound against the euro currency used by 19 EU countries.
But Cameron’s Conservative Party is deeply split on the issue, with as many as half its 330 legislators —
and at least six of the 23 Cabinet ministers — in favor of leaving the EU.
In a sign of the uncertainty stirred up by the EU vote, the pound dropped to a seven-year low of USD1.4058 before rebounding slightly, and also sagged 0.5 percent against the euro. Bookmakers shortened the odds on a vote to leave — though betting markets still favor a “remain” victory.
UBS Wealth Management said it put the probability of a British EU exit — known as “Brexit” — at 30 percent.
Simon Smith, chief economist at FxPro, said the next four months “won’t be a fun time” for the pound, which has weakened in recent months.
“It’s more the uncertainty that will weigh on the currency, rather than investors taking a view on the outcome and the implications for the economy, which are hard to argue either way,” he said.
Many big businesses have warned that leaving the EU —
with its open internal market of 500 million people — would hammer the British economy. But London Mayor Boris Johnson, a high-profile supporter of an “out” vote, said fears of economic catastrophe were “wildly exaggerated.” Jill Lawless, London, AP