UK Economy and the British Pound
Moody's on (22th), lowered the United Kingdom's sovereign credit rating one notch from Aaa to Aa1, for the first time since 1978, but the British prospects outlook was upgraded from negative to stable, implying no further downgrade in the short term.
Moody's said the Britain government implemented austerity policies and private companies reduced investment, causing the British debt to continue to rise. The level of government debt will increase to peak in 2016. Debt as a percentage of gross domestic product (GDP) ratio will be more than 96 %.
Sterling last Friday (22th) closed at the day's low. Pound against the U.S. dollar reported at 1.5163, down 0.6%, its lowest level since July 2010. Since the beginning of this year, Pounds has depreciated by about 6%. Among the currency of 10 developed countries tracked by Bloomberg Correlation-Weighted Currency Index, the pound was the second worst currency, only better than the yen.
In early Asian trade on Monday (25th), the pound continued to the decline trend, down nearly 180 points as the Asian market opened, to more than two-and-a-half years low. The pound sterling may face greater pressure in the afternoon.
The market’s attention focused on the UK GDP data released on Wednesday, and the Italian general election.
HSBC said that since 2013, the bank has been bearish on pounds. The bank believes that the pound will fall further. The British pound against the U.S. dollar could test 1.48. Brown Brothers Harriman said, the GBP / USD may be looking at 1.3500 in the long term.
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