UK ratings scare hits pound and gilts

UK ratings scare hits pound and gilts
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Ratings agency Moody’s has confirmed that Britain’s triple-A credit rating remains stable but that could change if its economic growth slips.

The pound and UK government bonds were hit by a media report that Moody’s was raising new doubts about the outlook for the triple-A rating which apparently is not the case.

The pound fell for the seventh straight day against the euro and slipped versus the dollar.

“Moody’s has the UK at a triple-A rating with a stable outlook,” a Moody’s spokesman said. “However, as we’ve been saying for a while, in a situation of lower growth combined with weaker than expected fiscal consolidation, we would reconsider our stance,” he added.

Andy Chaytor, a strategist at RBS, said: “I’m not sure there’s much new information in there. But it does remind the market that the UK might have a good path, but you can’t altogether ignore the vulnerability of that path.”

The British government aims to virtually eliminate a budget deficit of around 10 percent of GDP over the next four years, but lacklustre growth has caused some people to doubt whether it will meet this target.

The European Union said this week that the UK faces “a challenge” in implementing its budget cutting programme and that some of its growth forecasts are too optimistic.

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