US Spending Cuts will not Prompt in Downgrade says Fitch

Fitch Ratings on Wednesday said implementation of automatic U.S. government spending cuts due March 1, along with a government shutdown, would not prompt a negative rating action.

Implementation of the spending cuts, known as the “sequester,” and a government shutdown, would however “further erode confidence that timely agreement will be reached on additional deficit reduction measures necessary to secure the ‘AAA’ rating,” Fitch said in a statement.

Fitch said the suspension of the debt limit to May 19 has reduced pressure on the U.S. ‘AAA’ rating, and said it does not expect a repeat of the U.S. debt ceiling crisis of August 2011.

Failure to raise the debt ceiling in a timely fashion however would prompt a review and likely downgrade of the U.S. sovereign rating, Fitch said.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza