Disastrous Effects on Moneymakers in Forex Trading Line as Moody Rips Britain of AAA Rating

Moody deprived Britain of AAA rating for the first time since 1978 on
expectations that growth will "remain sluggish over the next few years" and also as it expects the U.K.'s debt to peak at 96% of GDP in 2016, up from around 90% today. Britain’s outlook was negative since last year. Moody lashed out at Britain after slashing the ratings of half a dozen European countries. France, too, has met a similar fate last years though US maintains the ratings from Moody's and Fitch, though it was downgraded by S&P in August 2011 following the debt ceiling standoff in Washington.


The ratings agency Moody's became the first to cut the UK from its highest
rating, to Aa1.Moody's said the government's debt reduction programme faced significant "challenges" ahead. Chancellor George Osborne said the decision was "a stark reminder of the debt problems facing our country. Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it. We will go on delivering the plan that has cut the deficit by a quarter."

In announcing the ratings cut, Moody's cited the "challenges that subdued medium-term growth prospects pose to the government's fiscal consolidation programme, which will now extend well into the next parliament".

It added that the UK's huge debts were unlikely to reverse until 2016. "The main driver underpinning Moody's decision to downgrade the UK's government bond rating to AA1 is the increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years due to the anticipated slow growth of the global economy and the drag on the UK economy," Moody's said.

But it added that the outlook for the UK is "stable", meaning it sees no further downgrades in the near future, and added "the UK's creditworthiness remains extremely high".

Steven Englander, a foreign exchange strategist with Citigroup (C, Fortune 500), said in a research note following the downgrade: "[W]hile by itself the announcement merely accelerates what was expected to happen at some point, the need for weakness [in the British pound] will become more apparent to policymakers and investors."

Among Europe's other major economies, Germany, Switzerland and the Netherlands maintain their AAA ratings from Moody's. France sits at Aa1, while Italy is down at Baa2 with Spain at Baa3.