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Eng£Aa1nd Downgrade: Citi's Take

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From Citi's Steven Englander, who confirms what we said previously: the UK is now officially in the hands of the monetary apparatus, which is controlled by, you guessed it, yet another Vampire Squid tentacle.

Quick UK/GBP downgrade comment

 

US, France, Japan have not paid up because of downgrades and it is unlikely that the bond market will be where the UK feels the most pain. With a CB willing to do large amount of QE, funding deficit is not an issue.

 

What is an issue is that it puts all the more pressure on monetary policy and the exchange rate to generate the growth that the UK needs, so while by itself the announcement merely accelerates what was expected to happen at some point, the need for GBP weakness will become more apparent to policymakers and investors.

The race for GBP-EUR parity is on.


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