How to write Credit Suisse analysts Elvis Marino (Alvise Marino), Honglin Jiang (Jiang Honglin) and Bhavin Shah (Shah Bhaveer), the consequences of a British exit from the EU may be more significant for the economy and the pound than it was in September 1992 when the Bank of England to raise interest rates triggered the collapse of the national currency. Currency speculate, including American billionaire George Soros played against the pound, buying up the German mark and creating an artificial shortage on the market. On 16 September 1992, which was called “black Wednesday”, the pound fell against the dollar by 4%, then, despite the measures taken by the British regulator, he continued to fall. In one month the British pound lost against most world currencies 10-15%.
The description of the events of 1992 serves as a good reminder, but there are significant differences between the economic background of the early 90s and the current situation in the market”, — noted in the review of Credit Suisse. First the British pound has become more international in comparison with 1992 the currency. The deficit of the current account in the UK since 1992 has grown from 2 to 7%, while international liabilities increased by 500%, give an example of analysts of the investment Bank. Therefore, they conclude, the economy has become more dependent on portfolio inflows from abroad. Secondly, as noted in Credit Suisse, the value of the assets since then have also increased substantially. All of these factors, analysts conclude, increases the risk for the British pound, in the case of a victory of supporters of leaving the EU, the consequences for the British currency may be more significant.than in 1992.
As suggested by the chief investment officer, Credit Suisse Michael O’sullivan, in the event of Brexit the pound may be among the most affected currencies and its exchange rate may fall to $1.2. Now in international markets, the British pound traded at $1,47-1,48.
Earlier in its review, Credit Suisse analysts predicted a sharp drop in the pound in the event of Brexit. At the very least the level of UK GDP could fall by 1-2%, and the pound may fall against the dollar and the Euro, celebrated in January, analysts at investment Bank Punjani Sonali (Sonali Punhani) and Neville hill (Neville Hill). In their opinion, in this case, the Euro could grow from the current 0.76 to 0.83 pound pound.
George Soros, who in 1992, at the fall of the pound during black Wednesday,” believes that British exit from the EU will lead to even more serious decline of the pound: a drop may be such that the pound is almost equal with the Euro. “I expect that this devaluation will be stronger and more destructive than the 15% fall that occurred in September 1992 when I was lucky enough to gain a substantial profit for his hedge Fund by the Bank of England and the British government”, — quotes the newspaper The Guardian. He predicted that Britain would vote for exit from the EU, the pound will fall at least 15% and possibly more than 20% from its current level of $1.46 to below $1,15.
Says O’sullivan, if there is a British exit from the EU, a number of European markets, especially in the periphery, in his opinion, could fall by more than Britain’s FTSE 100. “Protective currency in this case may be the Swiss franc and yen exchange rate which may rise, and the market of instruments with fixed income bonds in Germany and Switzerland, American Treasures,” he writes in his review “Brexit: time to decide”.
According to a leading strategist of investment company ATON Alexey Kaminsky, under the main blow will be the markets of Spain, Italy, Portugal. “Their stocks could fall by 20-25%. The European EuroStoxx 50 and the FTSE 100 English — by 10-15%,” — he said. In addition to U.S. Treasury bonds and bonds of Switzerland, Japan, according to Kaminski, in the black will be gold, “as one of the traditional “safe havens” during periods of increased volatility.” “Gold stocks can even grow in absolute terms”, — the expert does not exclude.
The referendum on withdrawal of Britain from the EU will be held next Thursday, June 23. So the decision was made for him to vote more than half took part. The latest survey conducted by the company Survation, shows that the UK’s exit from the EU are 42% of the population, as against 45%.