The UK Loses Its Triple A Rating – Sterling Exchange Rates

Late on Friday it was announced that credit rating agency Moody’s has downgraded the UK’s credit rating by one notch from AAA to AA1 which now leaves just Germany and Canada as the last two major countries with their triple A rating still in tact. Considering the Chancellor George Osborne had, early in his tenure, stated that keeping the triple A rating would be critical to helping rebuild the UK economy. It has been rumoured that the UK’d credit rating would be under threat and as a result we have already seen Sterling exchange rates fall but now we have had the official news from Moodys we could see GBP fall even further. Following the reports in the press over the weekend a number of analysts have predicted that Sterling Euro could fall back towards parity. This could obviously have huge implications for those clients looking to send money abroad as it is likely that it could become more expensive as the markets continue to digest the news.

What Does Losing Triple A Credit Rating Mean?

When a country has its credit rating downgraded it can have a few negative impacts on the country, its economy and therefore its currency. For example, a downgrade can increase borrowing costs for that country, so for the UK to borrow money now it is likely that the costs will increase making it either unattractive for us as a country to borrow more money or more likely it will go towards increasing our debt levels. Also, a downgrade will shake the confidence in the UK economy which means that we could see less money flow into the UK and in fact we could see more money leave the Pound as investors take their funds out of the “risky” UK economy and invest funds elsewhere, such as a safe haven like the US or Switzerland. Whichever way you look at this news it is negative and is likely to mean we see Sterling exchange rates fall.

How Can Clients Protect Themselves From Themselves From Possible Market Weakness?

At Foreign Currency Direct plc we offer a number of contract options which can be tailored to individual clients needs so while we see unexpected news such as the ratings downgrade over the weekend and the market outlook remains very unclear some of these contract options can be helpful for clients looking to send money abroad. One of the most popular contract options used is a forward contract. The forward contract allows clients to secure their rate of exchange at the current levels for a period in the future with just a small deposit, this means that regardless of what happens in the currency markets your rate is held which can take some of the risk out of the market and allows clients to budget. Other contract options such as limit orders and stop loss orders allow clients to target specific exchange rates and then allow our systems to do the hard work for them. If you would like to find out about the different contract options we have available then contact us today.

So, if you need to transfer money abroad then speak to one of our experienced currency broker who will be able to discuss your currency requirement and how this weekends news could affect your requirements. You can call through to us on 01494 849752 or alternatively you can email on