There has been speculation for some time that the UK, would lose its coveted AAA credit rating, as the coalition struggles to meet its fiscal targets and growth continues in a “zig zag” fashion as coined by Mervyn King. The downgrade is an embarrassment to the Chancellor George Osborne, as he had said that keeping the top credit rating would be a measure of his and the coalition’s term. This is the first downgrade in the 25 years that Moody’s has been rating debt. Analysts don’t expect the downgrade to have a significant effect on borrowing costs in the short term, but put further pressure on sterling. As Asia opened last night sterling gapped lower as investors sold the pound, but the pound has retraced some of its losses, currently up 75 pips from the lows at 1.5145.
The first challenge for Chancellor George Osborne is to stand the political pressure of the humiliating downgrade, and secondly puts the spotlight on his the next budget.
The Yen continues to weaken as the next Bank of Japan chief is expected to be Haruhiko Kuroda, who is seen as one of the more aggressive doves. He is expected to champion further monetary easing and potentially inflation targeting.
Moody’s downgraded the UK credit rating late Friday night to Aaa, stable outlook from AAA, negative outlook
France is more open to foreign investment than the US or Germany, the country's industry minister has claimed, as he singled out Britain as being in “even bigger difficulty than France over its budget deficit” - Daily Telegraph
China HSBC Manufacturing Flash PMI dips 1.9pts to 50.4 the consensus was for 52.2
U.K. ratings cut puts spotlight on budget - Wall Street Journal
Hong Kong introduced two new measures on Friday to stop speculative buying of homes from spreading to shops, offices, car parks and non-housing property after property prices recorded another increase recently -SCMP
Japan picks BOJ critic to be its next Chief -Wall Street Journal