Fitch cuts it rating for the UK with a negative watch – “material downside risk”

News

Fitch Ratings cut the U.K. to AA- from AA with outlook negative.

Fitch citing the hit to public finances:

  • The downgrade reflects a significant weakening of the U.K.’s public finances caused by the impact of the Covid-19 outbreak
  • and a fiscal loosening stance that was instigated before the scale of the crisis became apparent
  • also reflects the deep near-term damage to the U.K. economy caused by the coronavirus outbreak
  • and the lingering uncertainty regarding the post-Brexit U.K.-EU trade relationship

On the UK economy, Fitch:

  • deep near-term damage to the U.K. economy caused by the coronavirus outbreak and the lingering uncertainty regarding the post-Brexit U.K.-EU trade relationship
  • economic devastation being wrought by the coronavirus pandemic

Forecasts:

  • GDP to contract nearly 4% in 2020
  • growth around 3% in 2021
  • Fitch adds that there is a “material downside risk” to their forecast

GBP had a volatile ride last week, that is se to continue in the week ahead. For GBP/USD, don’t forget the US dollar side, where the panic demand for dollars has subsided:

ForexLive

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