Credit downgrade kicks the Pound

25 February, 2013

Robin Haynes

The Pound has seen further losses over the weekend, after ratings agency Moody’s on Friday cut the UK’s credit rating from AAA to AA1. Falls of a cent against the Euro and US Dollar were seen on Friday evening, and with European markets already having closed for the weekend, we could see further losses this morning as markets get to grips with the UK’s first credit downgrade since 1978.

In reality, the UK is not alone, with the USA and France having seen similar events in 2011. But the move, while not unexpected, is a humiliation for Chancellor George Osborne, who must now be regretting his assertions when the coalition came to power regarding the importance of maintaining the UK’s top level rating.

Confidence in the UK’s economy since the turn of the year has fallen dramatically, and if we are heading towards another period of recession, sterling could fall further. This week, the latest revision to 2012’s GDP figures is released on Wednesday.

The Budget in March could provide further problems for the economy and the Pound, which now faces a testing month ahead.

We have little else due this week likely to improve the outlook, with only housing market data due out in Britain.

Elsewhere, there are German and American figures out which will influence the Euro and US Dollar, but the headlines are likely to remain focused on the ailing UK economy.