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AUD/USD Sinks as S&P Downgrades Australian Credit Rating Outlook

AUD/USD Sinks as S&P Downgrades Australian Credit Rating Outlook

Daniel Dubrovsky, Contributing Senior Strategist

Talking Points

  • Australian Dollar declines against its major counterparts
  • S&P lowers Australia’s credit rating outlook to negative
  • The ratings agency said it was due to fiscal vulnerabilities

Keep an eye on short-term trends for Australian Dollar crosses using the Grid Sight Index (GSI) here.

The Aussie Dollar declined against its major counterparts after S&P Global Ratings downgraded Australia’s credit rating outlook to AAA negative from AAA stable. Simultaneously, ASX 200 futures declined suggesting the Australian Dollar’s movement was based on risk aversion.

S&P mentioned that the lower outlook was in part due to fiscal vulnerabilities. The ratings agency added that the country’s high indebtedness moderates its strengths. A lower credit rating may drive Australian borrowing costs higher as traders price in a relatively greater risk of default. This may translate into an overall increase in the cost of capital, weighing on economic growth and nudging the RBA toward further easing.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.