In this column we have highlighted before how the UK is walking a credit worthiness tight rope at the moment. 

Whilst it remains one of the few Western economies left with a triple A credit rating the agencies have been vocal in saying that they are closely watching our position.  In the past few months one of the themes apart from the continuation of the eurozone crisis has been continued growth downgrades not only to the eurozone, but the UK and the globe as a whole.  The World Bank yesterday was particularly gloomy in their revisions downwards of growth and economist after analyst has been gradually painting an even gloomier picture of the UK situation.

Without growth the deficit reduction plans are in danger of throwing us into a lost decade similar to that in Japan.  What used to be the world’s second biggest economy was also subjected to big cuts in government spending in order to tackle their vast debt, but the effect was to quash growth as it wasn’t matched with radical ways to stimulate the private sector in order to take up the slack.  If plans to invigorate growth are not more radical here in the UK then we are in danger of suffering the same fate as opposed to the sort of success that was had by Canada, Sweden and Finland who cut their debts much faster when it was needed and resulted in stronger growth sooner.

With our George having to borrow more than he expected just to stand still, the latest reductions in growth forecasts do not make his job any easier and unemployment, which we saw rise again yesterday, is unlikely to get any lower.  With the credit ratings agencies circling, the UK has a job on its hand to persuade them to keep our prized triple A.

This morning the FTSE remains in undecided territory which is where it has been for the past few days.  A bit of encouragement for the bulls yesterday is that the index managed to close above 5700, however it is still yet to break the back of resistance at 5720 or even test last October’s highs around 5770.  Hovering around 5700 again at the time of writing, investors seem keen to watch how things unfold in Greece and whether a deal can be struck over the restructuring of its debt.

In line with global equities pushing higher, the euro has taken full advantage and seen a two-day rise against the dollar.  You may wonder why this is happening considering several eurozone countries had their credit rating downgraded this week.  Firstly, there was the successful bond auction for German and Portuguese debt and secondly, US manufacturing data showed that factory production rose the most in a year.  Traders took all the positivity and embraced risk again, selling safe havens like the dollar and yen.  This morning EUR/USD is trading at 1.2860 and appears to remain on the upside, approaching its previous high.

Thanks to a weaker US dollar, gold enjoyed a third day of positivity yesterday and investors viewed the dollar denominated commodity as a bargain.  Some may see it as ironic that the asset used recently as a hedge in the market turmoil has risen on the back of successful debt auction in Germany and Portugal.  The yellow metal ended the day up 7.6 bucks at 1658.5 and now market watchers will see if the support turned resistance level of 1666.1 can be breached.  Currently, the precious metal is up at 1663.4.

The two contradicting forces in yesterday’s session for crude meant that the energy source ended the day only marginally lower.  On one hand, the weaker dollar pushed prices higher for black gold, but on the other, the prospect of rising supplies put energy investors off a bout of aggressive buying.  Hopefully later today the weekly inventories report will provide some direction for the liquid stuff, but as it stands, Brent trades up at 111.27.