Another remarkable session for GBP. It plunged late in Asia after Fitch warned that the UK is the most vulnerable AAA sovereign credit to a downgrade. A sharp drop to 1.6605 from 1.6750 was seen on long liquidation but prices have been trying to recover ever since. Cable has rebounded as far as 1.6720 thus far and trades now at 1.6700.
EUR/GBP has given back more than 3/4s of earlier gains, falling as low as 0.8953 moments ago from 0.9017 earlier highs.
With the benefit of hindsight, dealers are shrugging their shoulders at the reaction to the credit ratings comments. Every man and his dog knows the UK’s public finances are a shambles, so the comments should not have come as that much of a surprise. Had the comments come during London or New York trade, they likely would not have had as great an impact, but we’ll never know for sure.
0.8930/34 and 1.6750 are levels to watch near-term: at those levels, the marklet would be returning to the scene of the crime.
