Sterling suffers from loss of UK’s AAA credit rating | Smart Daily Currency Note
GBP/USD – 1.5152
Late on Friday, the UK lost its top credit rating from Moody’s, one of three credit rating agencies, who downgraded the UK debt by one grade to Aa1 from Aaa. This was not unexpected and is due to the bleak outlook for the nations growth and it was also noted by Moody’s that there are significant challenges that the government faces in trying to reduce public debt. Whilst a downgrade had been anticipated by many economists for some time, it still sent shockwaves through the market causing sterling to drop against all of its major trading peers bar the Japanese yen. Sterling had started Friday on the front foot reaching 1.1617 against the euro and 1.5310 against the US dollar before dropping off in the afternoon following comments from one of the members of the Monetary Policy Committee (MPC) who was urging for another round of quantitative easing. Perhaps the most influential release this week is the second estimate of the UK’s fourth quarter GDP which is expected to show a contraction of 0.3%. Other data released this week includes realised sales data from the Confederation of British Industry (CBI) and the Manufacturing Purchasing Managers’ Index (PMI) data which will be released on Friday plus several members from the MPC will be speaking this week. Call now for the latest updates on sterling.
The US dollar traded somewhat on the sidelines on Friday as news from the UK and Europe dominated the headlines. There is a raft of data out of the US this week which includes consumer confidence statistics, preliminary GDP figures which are expected to show modest growth of 0.5% for the fourth quarter of 2012, manufacturing PMI and the Chairman of the Federal Bank is speaking on several occasions. With so much data and commentary out of the US this week there is the possibility for a lot of volatility, call in now or a market update and a live quote.