Flash crash in the pound following Moody’s downgrade of UK

5m chart GBPUSDLast Friday, with most traders already having wound down for the evening, and headed home for the weekend, Moody’s decided it was time to spook the market with a downgrade for the British pound which came shortly after the close of the US session. The downgrade moved the UK from Aa1 to Aa2, and cited ongoing concerns over Brexit as the primary reason for the move and causing a flash crash in the pound as a result. This appeared across the entire GBP complex of currencies and likely to follow through as markets get underway on Monday. To quote from the Moody’s statement:

“the outlook for the UK’s public finances has weakened significantly since the negative outlook on the Aa1 rating was assigned, with the government’s fiscal consolidation plans increasingly in question and the debt burden expected to continue to rise.”

They then went on to say they expect the budget deficit to remain at 3% to 3.5% of GDP in the coming years and against the government’s plan of a gradual reduction to below 1% in 2021/22.

“Fiscal pressures will be exacerbated by the erosion of the UK’s medium-term economic strength that is likely to result from the manner of its departure from the European Union, and by the increasingly apparent challenges to policy-making given the complexity of Brexit negotiations and associated domestic political dynamics”

It will be interesting to see whether forex markets open gapped down this evening, but remember as always gaps get filled!

By Anna Coulling

About Anna 1054 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

2 Comments on Flash crash in the pound following Moody’s downgrade of UK

  1. Hi Anna do you teach any course on forex trading. I’m reading your book forex for beginners which is very good book indeed but unless one can put it i to practice its just good literature. So that why would like you to teach me practical trading using you method of price action and VPA.

    • Hi Kimarley – many thanks for your kind comments and so pleased you are enjoying the Forex For Beginners book. I do indeed have a course, and this has just been launched and is called The Complete Forex Trading Program and you can find all the details here – The Complete Forex Trading Program – look forward to seeing there and thanks again – regards Anna

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