FX.co ★ Moody’s downgrades eurozone growth forecast after Brexit vote

Moody's Investors Service has lowered its 2016 and 2017 growth outlook for the 19-nation eurozone to 1.5% from 1.7% and to 1.3% from 1.6%, respectively. Analysts say that is due to Britain’s decision to leave the European Union.
Moody's also slashed its forecast for UK growth to 1.5% this year and 1.2% in 2017 with previous expectations of 1.8% and 2.1% respectively.
"The downside risks to global growth stem... from the possibility that developments in the UK may give rise to increased political risk elsewhere in the EU," said Elena Duggar, an associate managing director at Moody's.
Analysts at Moody's note that stronger nationalistic and protectionist movements could threaten the EU's longer-term existence. The trade bloc's fragmentation could also encourage protectionist tendencies in other countries, halting globalization and curbing growth.
The EU economy accounts for a quarter of the world's GDP, thus making it a crucial part of the global economy. According to Madhavi Bokil, a vice president and senior analyst at Moody's, if the negative risks in the EU materialize, it would have a significant consequences for global trade and growth.
The Fed is unlikely to raise rates in the coming months amid growing financial instability and mixed economic data in the US. However, Moody's said it is quite possible that the Fed will resume its gradual rate hiking cycle in case economy continues growing at the same pace.