Brexit Update: UK Credit Ratings Slashed; More Cuts Could be Coming

June 28th, 2016

UK Credit Ratings Slashed; More Cuts Could be Coming

The United Kingdom’s (UK) credit rating has been the most recent casualty of last Thursday’s referendum to leave the European Union (EU).  Yesterday’s remarks from George Osborne, Chancellor of the Exchequer, have done little to affect market expectations of long-term instability. Osborne said the UK “has the strongest major advanced economy in the world,” and was coming from a “position of strength.” Despite these remarks, credit rating agencies have acted swiftly to cut the UK’s ratings.

Moody’s acted first, changing the UK’s sovereign rating from stable to negative, anticipating a “prolonged period of uncertainty.” S&P, who had previously held out its AAA rating, cut the UK’s rating down by two notches to AA and revised its outlook to negative. Fitch also lowered its rating to AA, anticipating an “abrupt slowdown” in the British economy.  All three of the major credit rating agencies have indicated that further downgrades could follow, especially considering a possible initiative from Scotland to rejoin the EU. Furthermore, analysts and the three agencies forecast two to three years of recession for the UK.

Exchange Rates

£1 GBP = $1.34 USD

€1 EUR = $1.11 USD

(as of 9:30 AM EST, 6/28/2016)


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