The British pound hit fresh lows against the dollar and the euro on Wednesday as financial turmoil intensifies in the wake of UK’s decision to leave the European Union. The pound, also known as sterling, sank over two and a half cents, or 1.4 percent, to $1.3, the weakest level in 31 years against the US currency.
Britain’s vote to exit the EU, known as Brexit, has plunged global markets into turmoil. The British currency also fell to its lowest since 2013 against the euro. The pound is currently trading at 1.8 euros. It has lost more than 14 percent of its value since UK’s referendum last month to exit the EU, as investors worry about the impact on the British economy and continuing uncertainty about the country’s political direction.
This comes as the Bank of England highlighted a number of risks emanating from the Brexit vote. The risks include a hit to the commercial real estate market from the possible relocation of banking jobs to other European cities. Last week, the American financial services company, Standard and Poor’s, downgraded Britain’s credit rating by two notches, from AAA to AA, a humiliating blow for the country and one that could cost its economy.
S&P was the last of the big three ratings agencies to have a blue-chip rating on the UK’s credit-worthiness. Moody’s, which stripped the UK of its top-notch rating following the austerity cuts of 2013, said last week it might further downgrade its credit rating. The British departure has triggered concerns that other EU nations may follow, challenging the political fabric of an alliance that has been constructed among nearly thirty very different countries.