Monday was the worst day for the currency of the UK for the past seven years: the pound fell to a 7-year low against the US dollar after the Mayor of London, said that the EU supports the country of exit. Rating agency Moody's warned that the strong credit rating of the UK would be in jeopardy if the majority of residents voted for the output from the block composition.
Experts say that this trend will continue until the day of the referendum on 23 June. So why is the pound came under pressure? How will this affect the economy? And why credit agencies are concerned about the future of the UK?
Why pound falls?
In simple terms, investors are concerned about the economic prospects of the UK if the country out of the EU and therefore the composition of their interest in the currency decreases. Regardless of the outcome of the referendum, the country's economy could be adversely affected, economists say. Businesses do not like uncertainty, and therefore exports, investment and economic growth in general may feel the impact of this uncertainty. Economists are unanimous about «Brexit»: some point to the negative aspects, some say that in the long run it may play into the hands of Great Britain. But currency markets are focused on short-term risks.
Traders also believe that the pressure on the pound was strengthened by statements of London Mayor Boris Johnson. Everyone knows that Johnson is considered ardent supporter «Brexit». Economists at investment bank Citi raised the probability of voting for something to come out of the EU by 30-40%.
Nothing to worry about credit agencies?
As long as the country's credit rating remains at the same level, but the international rating agencies have repeatedly warned that if Britain left the EU, its rating could be downgraded.
Why? Agencies fear that the so-called «Brexit» negative impact on investment, exports, and thereby weaken the overall economic growth.
Fitch Ratings warned that the way out of the EU can cause both short and long-term risks for the UK.