The outlook for the UK’s credit score was revised to negative by Moody’s Investors Service following weeks of turmoil in the British government, during which the new prime minister resigned after only 45 days.
The rating agency said the change was driven by “heightened unpredictability in policymaking” amid weaker growth prospects, high inflation and “risks to debt affordability from likely higher borrowing”.
The company affirmed the country’s rating at Aa3, a statement said.
The rating action comes several weeks after the firm said that the UK government’s mini-budget, which was later scrapped, risked doing lasting damage to the nation’s debt affordability.
It also noted a risk of a sustained weakening in policy credibility.
Liz Truss resigned on Thursday to become the shortest-serving prime minister in history.
Her mini-budget was a package of unfunded tax cuts and spending promises that caused markets to panic.
During her short premiership, gilt yields posted some of their biggest moves on record and the pound sunk to a record low.
Both Fitch Ratings and S&P Global Ratings lowered the country’s outlook to negative after Ms Truss’s tax cut plans amid rising fiscal risks. S&P rates the nation AA, the third-highest level, while Fitch Ratings scores it one level lower at AA-.
The pound fell 0.8 per cent on Friday to a weekly low of $1.115, reversing the brief rally after Ms Truss announced her departure. It dropped 0.5 per cent against the euro to €1.142.
The slide came as Conservative MPs began manoeuvring for the frantic week-long leadership contest to succeed Ms Truss.
Rishi Sunak, Boris Johnson and Penny Mordaunt are in the frame to succeed Ms Truss but none of them are yet considered the clear favourite.
Market moves have been particularly closely watched in Westminster since the botched mini-budget on September 23 drove Britain into economic turmoil.
The package of more than £40 billion ($44.5bn) in tax cuts led to a crash in sterling's value, a jump in mortgage costs and an emergency intervention by the Bank of England to protect pension funds.
Ms Truss's authority never recovered from the mayhem.
The contest to succeed her is being compressed into a week so that the new leader will be in place before October 31, when the chancellor is expected to set out a new fiscal plan.
PSA DUBAI WORLD SERIES FINALS LINE-UP
Men’s:
Mohamed El Shorbagy (EGY)
Ali Farag (EGY)
Simon Rosner (GER)
Tarek Momen (EGY)
Miguel Angel Rodriguez (COL)
Gregory Gaultier (FRA)
Karim Abdel Gawad (EGY)
Nick Matthew (ENG)
Women's:
Nour El Sherbini (EGY)
Raneem El Welily (EGY)
Nour El Tayeb (EGY)
Laura Massaro (ENG)
Joelle King (NZE)
Camille Serme (FRA)
Nouran Gohar (EGY)
Sarah-Jane Perry (ENG)
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How to keep control of your emotions
If your investment decisions are being dictated by emotions such as fear, greed, hope, frustration and boredom, it is time for a rethink, Chris Beauchamp, chief market analyst at online trading platform IG, says.
Greed
Greedy investors trade beyond their means, open more positions than usual or hold on to positions too long to chase an even greater gain. “All too often, they incur a heavy loss and may even wipe out the profit already made.
Tip: Ignore the short-term hype, noise and froth and invest for the long-term plan, based on sound fundamentals.
Fear
The risk of making a loss can cloud decision-making. “This can cause you to close out a position too early, or miss out on a profit by being too afraid to open a trade,” he says.
Tip: Start with a plan, and stick to it. For added security, consider placing stops to reduce any losses and limits to lock in profits.
Hope
While all traders need hope to start trading, excessive optimism can backfire. Too many traders hold on to a losing trade because they believe that it will reverse its trend and become profitable.
Tip: Set realistic goals. Be happy with what you have earned, rather than frustrated by what you could have earned.
Frustration
Traders can get annoyed when the markets have behaved in unexpected ways and generates losses or fails to deliver anticipated gains.
Tip: Accept in advance that asset price movements are completely unpredictable and you will suffer losses at some point. These can be managed, say, by attaching stops and limits to your trades.
Boredom
Too many investors buy and sell because they want something to do. They are trading as entertainment, rather than in the hope of making money. As well as making bad decisions, the extra dealing charges eat into returns.
Tip: Open an online demo account and get your thrills without risking real money.
