Another day, another downgrade, seems to be the way things look at the moment. Greece has yet again been downgraded and leading ratings agencies are suggesting that a Greek default is as close to 100% as possible. This may lead to the Euro coming under pressure in the not too distant future, but after last week’s bailout package being secured the Euro is enjoying a strong rally especially against the Dollar.
The Dollar still remains under pressure and will probably remain in that position until the debt ceiling is increased. The other problem that the US has at present is the consistent speculation about the possibility of losing their AAA credit rating. If this were to happen it could be a major blow for the Dollar with markets losing faith in a currency that has always been classed as safe haven.
Sterling also seems a little in the firing line at the moment as concern is growing over the growth outlook for the UK. The next measure in GDP is expected to show the UK grew by 0.2% in the last quarter against a 0.5% growth level the previous one. This reading although not negative will confirm the Bank of England are probably taking the correct stance at present by not raising interest rates, and that the likelihood of interest rates increasing in the near future looks ever less likely. Analysts now suggest that UK interest rates are not likely to rise until mid 2012 which could have a small but negative effect on the pound.
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