Chatter that S&P will downgrade the UK later tonight has pulled cable as low as 1.5455.
The market bites on downgrade rumors because ratings agencies inform governments about the downgrades before they are official, so word has time to spread. Oftentimes, when a rumor is false it will be quickly denied by the officials so if we don’t hear a rebuttal in the next hour or two, there could be something to the rumor.
What makes me skeptical is that the UK budget is on March 20. S&P will have a much better idea of the trajectory of UK debt after the budget figures are announced so they are likely to wait.
In any case, a downgrade should be priced in by now so it’s neither a shock nor a surprise. After the initial kneejerk lower, it shouldn’t weigh on cable.
