Forex - GBP/USD slides following Moody’s downgrade

Sterling continued weakening against the greenback during Monday’s Asian session after Moody’s Investors Service stripped the U.K. of the prestigious AAA credit rating last Friday. 

In Asian trading Monday, GDP/USD dropped 0.34% to 1.5123. The pair was likely to find support at 1.5074, Monday’s low, and resistance at 1.5451, Wednesday’s high. 

Last Friday, just before the close of U.S. markets, Moody’s announced it was downgrading the U.K. sovereign credit rating to Aa1 from AAA, citing a slack growth outlook and a rising debt load, among other factors. 

Sterling, which fell to a two-and-a-half year low against the dollar on Thursday, is already showing signs of trading lower against the greenback. The pound came under pressure last week against the dollar and other major currencies on speculation the Bank of England may restart quantitative easing efforts to jolt the U.K. economy. BoE halted asset-buying in November 2011. 

In a research note, UBS said it expects GBP/USD to trade in a range of 1.40-1.50 this year. HSBC reiterated a GBP/USD price target of 1.48. 

U.K. Chancellor of the Exchequer George Osborne, who vowed in 2010 that the U.K. would not lose the AAA rating, is now facing some political heat because that event has come to pass. Some industry groups said Osborne should have acted to cut corporate taxes to stimulate growth, something he did not do. It is also believed that increased austerity will take too long to produce the near-term results Britons and financial markets are looking for with regards to restoring the AAA rating. 

Some of the other countries that currently hold AAA ratings include Australia, Germany, Hong Kong, Singapore and Switzerland. 

Elsewhere, EUR/GBP rose 0.35% to 0.8721 while GBP/JPY added 0.47% to 142.34. GBP/AUD rose 0.11% to 147.20.