The Stay in campaign seem to think the fall in the pound against the dollar is the result of Brexit fears. I don’t think so. But let’s humour them and agree that the chances of Brexit have become much higher recently and this drives markets. Then on that basis they need to explain the following:
In early May 2015 on the election of a Conservative government offering a referendum it cost the government 1.9% a year to borrow 10 year money. Clearly before the election there was no chance of a Brexit, and after the election there could only be a chance of Brexit on a Conservative win.
By January 3rd this year this had fallen to 1.77%.
On February 1st it still cost 1.626%.
Over the month of February, the first month of serious campaigning for Brexit and the first month that markets focused on the possibility of exit, the cost fell to 1.37%.
Clearly markets think the UK out of the EU will be more credit worthy! That makes sense, as we will no longer need to send huge sums of borrowed to the EU and not get it back.