All eyes are on Tuesday's FOMC meeting, and what the US FED may say, or not say regarding low interest rates, the economy, unemployment, and the dollar. As such, the dollar opened weaker this week as weekend news reports raised arguments against the dollar and ability of the FED to make changes. However, China's Premier Wen at the National People's Congress stated that risks in the global economy may cause setbacks which will limit the world's financial recovery. This caused Asian stock markets to give back their early gains and trade lower on the day, thus causing the dollar to rally on risk aversion buying.
But, probably the most interesting point of the early trading was analysis from the credit ratings company Moody's. In a research report about AAA rated sovereign countries, they mentioned that going forward credit ratings and outlook will be based on debt control. Specificlaly they stated that the US's AAA rating would be vulnerable if President Obama's deficit estimates were correct.
The surprising point was that as worried about the US, they were optimistic about the UK. Firstly they believed that regardless of the upcoming Parliamentary election results, the new government will be able to implement spending cuts and deal with the country's debt. Secondly, they felt that the UK was a long ways away from having their AAA debt rating cut.
Nonetheless, they added that both countries would be vulnerable if government debt yields rose too fast. On the news the GBPUSD jumped 30 pips from 1.5160 to 1.5190, but dropped back to pre news levels as dollar strength continued.