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Moody's downgrades UK rating to Aa1 from AAA

Moody's Investors Service has removed UK from its AAA status today after downgrading the UK government bond rating to Aa1 from Aaa. The outlook on the ratings is now stable.

Moody's considers that the "continuing weakness in the UK's medium-term growth outlook with a period of sluggish growth," will be extended into the second half of the decade.

Moody's affirms that the "weakness in the UK's medium-term growth outlook will continue with a period of sluggish growth" will extend into the second half of the decade. The agency is afraid that the "challenges that subdued medium-term growth prospects," will pose difficulties to the "government's fiscal consolidation programme, which will now extend well into the next parliament."

These problems will deteriorate the shock-absorption capacity of the government's balance sheet, that is unlikely to reverse before 2016.

Moody's also downgraded the Bank of England rate to Aa1 from Aaa.

The GBP/USD reacted lower and currently is trading below the1.5200 level around1.5170.

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