GBP/USD Strengthens Above 1.3350 as US Dollar Weakens After Moody's Downgrade

GBP/USD Rises Above 1.3350 as US Dollar Weakens Following Moody’s Downgrade

GBP/USD strengthened above 1.3350 as the US Dollar weakened after Moody’s downgraded the US credit rating from Aaa to Aa1. The downgrade reflects concerns over rising US federal debt, budget deficits, and weakening economic fundamentals. This move by Moody’s follows similar actions by Fitch Ratings in 2023 and Standard & Poor’s in 2011.

The weakening of the Greenback was further supported by economic indicators, including easing inflation metrics like the Consumer Price Index (CPI) and Producer Price Index (PPI), suggesting reduced price pressures. Additionally, disappointing US retail sales data raised concerns about ongoing economic weakness, leading to speculations of potential Federal Reserve rate cuts in 2025.

As the US Dollar faces pressure, market participants are focusing on the upcoming UK CPI release for insights into the Bank of England’s policy direction. The UK’s inflation data could provide clues on future interest rate decisions, influencing the pound’s strength against the dollar.