Renewed Woes Over Sovereign Debt Ratings with UK and US are at Risk!

Daily Forex Fundamentals | Written by ecPulse.com | Dec 08 09 11:18 GMT |

Moody's managed to add to the ongoing volatility in the market, as their latest edition of their Aaa Sovereign Monitor, that assesses their top eight Aaa rated countries, of which the most important are the US, the UK, Germany and France. Where the financial crisis has hit those economies badly and managed to strike their financial sector and force the governments to extend their helping hand and increase their lending swelling their public deficits. The worrisome part was revolving as usual around the United States and the United Kingdom ratings. Moody's sees that those two nations are not at all immune to testing the Aaa boundary which is known as the point of “no return”. Despite the four named nations being indeed stricken by the crisis, and though four of the nations still have “stable” Aaa top rating by Moody's Germany and France still have their “resistant” category unlike the case for the United Kingdom and the United States which have shifted lower to “resilient” and at risk of sinking further to “vulnerable” as the deficit continues to expand further beyond proportionate representation of the GDP which is already weak affecting by that the governments' capabilities of extending their borrowing. To understand the depth of the ratings, both nations are still among the Aaa top ratings by Moody's yet that class has also categorize by itself, which are “resistant”, “resilient”, and “vulnerable” and as we said with France and Germany with still a “resistant” classification the other two are lower at a “resilient” categorization and risk sinking further to the “point of no return”! The troubles for the weak UK economy continue to expand, especially as the incoming fundamentals remain very weak and the economy lags behind others well. Adding to the agony already floating in the market over Dubai World debt default, which UK's biggest four banks are deeply involved with, with an already fragile financial sector, comes the warning from Moody's and though they are still stable within the Aaa ratings they are surely not immune of testing the lower limit! Moody's scare comes just a day ahead of Darling's Pre-budget testimony tomorrow, and after he yesterday reiterated his resilient stance of preferring to do too much than too little to help the economy rest ashore. His stance implies that further measures might be extended to the economy at the point the deficit swelled high signaling that he will delay his attention to acting upon the highest deficit since WWII, saying “I do think we need to make a determined effort to get our debt down”! Gross debt to GDP ratio has swollen since the start of the crisis estimated to end the year at 69% of the GDP compared to 44% at the end of 2007. The budget deficit also exceeded the EU 3.0% golden rule and according to the European Commission it now stands above 10% of the GDP. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk