Pound Sterling Beats US Dollar After US Sovereign Credit Downgrade

Pound Sterling Beats US Dollar Following US Credit Downgrade

The Pound Sterling (GBP) appreciated significantly against the US Dollar (USD) on Monday, trading near 1.3400 in the European session. This surge came after the Moody’s downgrade of the US sovereign credit rating from Aaa to Aa1 last Friday. The downgrade was a result of concerns over the US's fiscal health, though Moody’s clarified that it did not indicate a loss of confidence in the US administration or the Federal Reserve (Fed).

As a result, the US Dollar Index (DXY), which tracks the Greenback against six major currencies, dropped to around 100.40, under pressure from the downgrade. Analysts also believe the Fed is unlikely to cut interest rates in the near future, despite the White House lowering tariffs as promised earlier in April.

Another factor weighing on the US Dollar’s outlook is growing anticipation surrounding the UK-EU trade deal. The potential agreement is expected to boost the UK economy and help solidify relations between the two regions post-Brexit. This has helped improve the GBP’s outlook, further weakening the USD.

In addition, US President Donald Trump’s positive reception regarding potential trade talks with China has also provided some optimism for the Greenback, though concerns over fiscal policies and global trade issues continue to impact investor sentiment.