Loonie falls, pound drops after Brexit

TORONTO – The Canadian dollar is down more than a cent and half against against the U.S. greenback as markets around the world come to terms with the Brexit vote, which puts Britain on a path towards exiting the European Union.

The loonie was at 76.66 cents US about 7:30 a.m. ET, down 1.64 cents, or 2.5 per cent, from Thursday’s close, with two hours to go before North American stock markets open.

Meanwhile, the British pound plunged even more sharply against other currencies this morning, including the Canadian dollar.

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The British pound was at lows that it hasn’t seen since the mid-1980s.

It was down more than eight per cent compared with the U.S. dollar and about 6.5 per cent against the Canadian dollar. The pound was worth just under US$1.37 and just under C$1.79.

“Commodity prices (except for gold . . . ) are taking a hit from lowered prospects for global growth,” BMO Capital Markets analyst Jennifer Lee wrote in a commentary.

August bullion contracts were at two-year highs — up $59.80 at one point to US$1,322.90, August crude contracts were down $2.37 at US$47.73 per barrel and July copper contracts fell 5.4 cents to just under US$2.11 a pound.

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Signs were pointing to a big drop on the major U.S. and Canadian stock market indexes.

Dow Jones futures contracts were down 505 points or nearly three per cent to 17,410.0, S&P 500 futures dropped 74.50 points to 2,031.25 and the Nasdaq futures lost 158.25 points to 4,304.25.

Financial and resource stocks will likely set the tone for Canada’s largest stock market once the Toronto Stock Exchange opens at 9:30 a.m. ET.

“Central banks will now move to damage control mode,” a CIBC commentary predicted.

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It says the Bank of England could cut its key interest rate as early as Sunday and “we might also see co-ordinated actions with other central banks to smooth currency movement.”

A Scotiabank foreign-exchange commentary said there had been reports that central banks in Switzerland and Denmark had directly intervened to dampen currency fluctuations.

The S&P/TSX index closed on Thursday at 14,131.38, up 127.57 points or 0.91 per cent before it became clear that the Leave side had won the vote on Britain’s place within the European Union.