15.02.2012

By

Sterling fell this morning after Fitch Ratings threated the UK's AAA status.

The currency is currently trading at 1.57 against the dollar and 1.2 against the euro after the ratings agency warned that the UK hardly had any room to counter further financial costs and put it on a negative watch.

It also put pressure on the Chancellor George Osborne to not be tempted into a poltically pleasing giveaway budget.

Although Fitch said the government's austerity plans were credible, "the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery”.

With pressure mounting from within and without his party, Osborne could welcome the warning as a vindication for him to stick to his spending plans.

The ratings agency warned that any relaxation of the asuterity plans would immediately trigger a downgrade and comes a month after a similar action by Moody's.