UK Keeps AAA Ratings at S&P as Pound Advances against the Euro

By TraderVox.com

Tradervox (Dublin) – The Standard and Poor’s have disagreed with Fitch and Moody’s on the UK economic outlook. The S&P have confirmed UK AAA economic outlook despite the other two warning that the country might be at risk of losing this status. According to a statement from S&P the coalition led by the UK Prime Minister David Cameron have succeeded in ensuring that determined focus is put on curbing the current budget deficit. The statement gave accolade to the political institution in the country for being able to act quickly to economic challenges.

The decision by the S&P has been prompted by the current expectation that the UK government will undertake the bulk of its fiscal consolidation operation. There is also expectation that economic growth will remain in line with the current projections. This decision is in contrast to that of Moody’s and Fitch. The Chancellor of the Exchequer has used negative reports from Moody’s and Fitch to insist that the government should continue with its efforts in deficit cutting. After the report was released, Osborne said in a statement that the S&P ratings are an indication that UK has continued to weather the international debt crisis in Europe.

The sterling pound has increased on these comments rising to 18-month high against the euro. The pound was rose against 11 of the 16 major currencies as before a UK Homes sales report. The sterling pound advanced by 0.4 percent against the euro to trade at 82.18 pence per euro; it had earlier rose to 82.10 pence, which is the strongest it has been since September 9, 2010. It has been one of the best performers in the past month advancing by 0.7 percent.

However, the S&P indicated that the austerity plan adopted by the government will drag on economic growth in spite of the country’s ability to absorb economic shocks improving. In their decision, Moody’s and Fitch had indicated the inability to absorb economic shock as the reason they were giving warnings to UK.

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