U.K. Pound Plunges on Moody's Downgrade Warning

Currency trading on the FX market should consider that the sterling is dropping as traders consider the latest warning from Moody's. The credit rating agency issued warnings that the U.S., U.K., France and Germany could face ratings downgrades soon with regard to their sovereign debt.

The countries that are considered most vulnerable right now are the U.S. and the U.K. And Britain is considered even more vulnerable than the U.S., reports Boris Schlossberg in FX360:

Although both Anglo-Saxon economies face serious challenges in managing their fiscal deficit problems, the UK is far more vulnerable that the US to a potential downgrade because of the relatively small size of capital markets and high dependence of its economy on the finance sector for growth.

It is little surprise that this news is resulting in a drop by the sterling in forex trading against the U.S. dollar. Added to the fact that the Bank of England might start quantitative easing again, and the fundamentals for Britain look shaky indeed.