Tuesday, July 31, 2012
Uncertainty over UK's credit rating
Moody's have reaffirmed their negative outlook on the UK's credit rating, despite the fact that S&P just hours earlier confirmed that the UK would keep the AAA rating.
Moody's cited 'concerns about the UK's macro-economic outlook for the next few years' as the reason for the negative outlook, while S&P stated that 'the economy should recover in the remainder of 2012 and strengthen thereafter'.
Andy Scott, premier account manager at foreign currency brokers HiFX, said:
"Moody's reconfirmed that the UK's AAA rating is at risk of being cut due to the continued weakness of the economy. This comes just 24 hours after S&P confirmed that the UK will keep it's AAA rating. Sterling barely moved against the Euro and the Dollar though it was at the days lows against the Australian and New Zealand Dollars.
"The economy's performance is worrying given that we've only managed two quarters of growth in the last seven and the figures released last week seem to paint a worsening picture. Despite this, the U.K. has been considered somewhat of a safe place to have your money if you consider that government borrowing costs are at record lows. Sterling has also performed quite well this year, at least against some currencies and this is important. When you compare the outlook for the U.K. with Europe and the U.S. there isn't a huge amount to separate them though Europe's biggest economy (Germany) is growing at the moment as is the U.S. Expectations that monetary policy will be eased further by the Federal Reserve, ECB and the BoE should keep Sterling supported against the Dollar and the Euro. Persistent weakness in the UK economy though would lead us to expect the Pound to struggle to break the resistance levels of 1.5750 against the Dollar and 1.30 against the Euro.
"Where we continue to see problems for Sterling is against the high yielding Australian and New Zealand Dollars. Both currencies offer significantly better economic back drops, largely due to china and have significantly lower debt to GDP ratios. After a brief rally having been at multi-decade lows against the two commodity based currencies recently the Pound is back on the slide against both. As euro zone problems persist, we see risks that we haven't seen the worst yet against the Aussie and the Kiwi despite them being overvalued by around 30%."
Andy Scott, premier account manager at foreign currency brokers HiFX, said:
"Moody's reconfirmed that the UK's AAA rating is at risk of being cut due to the continued weakness of the economy. This comes just 24 hours after S&P confirmed that the UK will keep it's AAA rating. Sterling barely moved against the Euro and the Dollar though it was at the days lows against the Australian and New Zealand Dollars.
"The economy's performance is worrying given that we've only managed two quarters of growth in the last seven and the figures released last week seem to paint a worsening picture. Despite this, the U.K. has been considered somewhat of a safe place to have your money if you consider that government borrowing costs are at record lows. Sterling has also performed quite well this year, at least against some currencies and this is important. When you compare the outlook for the U.K. with Europe and the U.S. there isn't a huge amount to separate them though Europe's biggest economy (Germany) is growing at the moment as is the U.S. Expectations that monetary policy will be eased further by the Federal Reserve, ECB and the BoE should keep Sterling supported against the Dollar and the Euro. Persistent weakness in the UK economy though would lead us to expect the Pound to struggle to break the resistance levels of 1.5750 against the Dollar and 1.30 against the Euro.
"Where we continue to see problems for Sterling is against the high yielding Australian and New Zealand Dollars. Both currencies offer significantly better economic back drops, largely due to china and have significantly lower debt to GDP ratios. After a brief rally having been at multi-decade lows against the two commodity based currencies recently the Pound is back on the slide against both. As euro zone problems persist, we see risks that we haven't seen the worst yet against the Aussie and the Kiwi despite them being overvalued by around 30%."
DATED: 31.07.12
FEED: MI
