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Wednesday, June 08, 2011

Moody's Threatens To Downgrade UK

Moody's, having had a "pop" at the USA, has now also had a go at the UK.

The FT reports that Moody's has warned that the UK could lose its AAA credit rating, if growth continued to slow and if the British government decided to slow down its fiscal consolidation plans.

Needless to say the market took fright, and Sterling fell to a one-month low against the euro and fell against the dollar and the yen.

As ever, with currency movements such as this, there are organisations that manage to make a nice living out of them; even if the movements are based on "what ifs" warnings issued by ratings agencies that were once giving AAA ratings to toxic financial products.

People, quite correctly, ask why do markets "listen" to the now discredited ratings agencies?

Sadly the answer is simple, the markets and ratings agencies need each other and feed off each other. Money can be made by neither, without the other.

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