S&P Cuts Australia’s Credit Rating Outlook

The Australian dollar plunged today after Standard & Poor’s had cut the country’s credit rating outlook. The Aussie has bounced later and is now trading close to its opening level.
S&P affirmed Australia’s long-term credit grade at AAA but changed the outlook to negative. The agency cited the following reasons for the decision:

The negative outlook on Australia reflects our view that without the implementation of more forceful fiscal policy decisions, material government budget deficits may persist for several years with little improvement. Ongoing budget deficits may become incompatible with Australia’s high level of external indebtedness and therefore inconsistent with a ‘AAA’ rating.

As for Thursday’s economic data from Australia, it was good as the construction sector has returned to growth in June.
AUD/USD traded at 0.7504 as of 13:01 GMT today after opening at 0.7517 and falling to 0.7466 intraday. EUR/AUD opened at 1.4753, rallied to the daily high of 1.4831 but retreated to trade at 1.4766 later.

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