Pound could fall to $1.20 but Carney would step in, economists say

After falling to a seven-year low on Monday, the pound could sink much further ahead of the In-Out European Union referendum, economists have warned, but the Bank of England's Monetary Policy Committee would be likely to intervene before long.

The British currency sank to just $1.41 and €1.28 on Monday after confirmation that a vote on the UK's continued membership of the EU will be held on June 23, with some major political figures joining the 'leave' campaign.

The current one-in-three odds of the UK leaving the EU could rise much higher as a fifth of the electorate has not yet decided which way to vote.

Sterling could fall to $1.20 when Brexit is fully priced-in, said Panthon Macroeconomics, but "there is a limit to how far the MPC would let sterling fall".

The MPC and Governor Mark Carney would likely, if the perceived chances of Brexit rise further, "begin to talk up the possibility of raising rates soon in order to support the pound".

More likely, the current strong level of consumer confidence will support the status quo, however, and avert any Brexit.