Forex News – Moody’s downgrades six EU countries, warns UK

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Moody’s Investors Service announced late on Monday its decision to downgrade sovereign rating s of six EU countries, as a result of the ongoing debt crisis in Europe.

Moody’s cut ratings for Portugal, Slovakia, Slovenia and Malta all by one notch. Meanwhile Spain was downgraded by two notches. The outlook on France was lowered as well, and the United Kingdom’s triple-A rating was put on a negative outlook.

In an official statement Moody’s said its decision on the downgrades was based on the susceptibility of the countries to “the growing financial and macroeconomic risks emanating from the euro-zone crisis and how these risks exacerbate the affected countries’ own specific challenges.”

It is the first time the UK’s top-notch rating has been put on review by one of the major agencies since S&P removed its negative outlook in 2010.

As a result, this warning could risk the sterling losing  its relative safe-haven status compared to the euro and deter investors from switching out of euro zone sovereign debt into UK gilts, a strategy that has supported the pound in recent months.

EURUSD tumbled on the news falling to 1.3126 just before the European session open.  The pound was also affected, falling to a two-week low against the dollar. GBPUSD fell to 1.5685.