The sterling pound consequently fell against eleven of its sixteen major peers. Fitch changed its rating to negative citing the current huge debt levels and the weak recovery. This statement did not come as a surprise to many analysts as they had already expressed their concerns about the measures being taken to curb the negative economic situation in the country. Ulrich Leuchtmann a Currency Strategist at Commerzbank cites the monetary and fiscal policy as some of the factors that are haunting the pound for now.
The sterling pound declined by 0.2 percent against the euro to trade at 0.8327 at the start of New York trading session yesterday. Against the yen, the pound weakened by 0.3 percent to trade at 130.85 yen but remained little changed against the dollar at $1.5677.
In its statement, Fitch said that it had decided to change UK’s rating due to the limited fiscal ability to absorb further economic shocks and the elevated debt levels. The current weaker than expected economic recovery only added to the already existing fears of the county’s ability to absorb economic shock.
The decision by Fitch came barely a month after Moody’s Investor service warned the UK that it risked losing its top credit ratings due to the deteriorating economy. The UK is in economic turmoil, and unlike the euro area crisis, the efforts by the BOE are not receiving positive reception from some opposition politicians and analysts who claim that the BOE is trending on risky waters with its QE program.
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