Warning on UK economy sees pound take a dive
The pound tumbled tonight and stock markets around the world slammed into reverse after rating agency Moody's cast doubt over the financial strength of the UK and the US.
Moody's Investors Service said the UK and US could "test the AAA boundaries" because of the dreadful state of the public finances in both countries.
It said the UK and the US merely had "resilient" AAA ratings as opposed to the "resistant" top ratings of Canada, Germany, Switzerland and France.
The pound fell 1.63 cents against the US dollar to $1.6283 and 0.56 cents against the euro to �1.1037.
Stock markets were also on the slide with the FTSE 100 index down 76.25 points to 5234.41 in London and the Dow Jones Industrial Average off 124.10 points to 10,266.01 in New York.
The Moody's warning came as Chancellor Alistair Darling put the finishing touches to tomorrow's Pre-Budget Report (PBR).
The Government is set to borrow around £180 billion this year - nearly 13% of gross domestic product, the highest in the G20 - as tax receipts plummet and spending soars.
Darling will use the PBR to again pledge to halve Britain's debt over four years through spending cuts and tax increases.
Critics want the Chancellor to act faster to reduce the debt level.
But others claim drastic cuts now would choke the recovery and plunge the UK into a deeper and longer recession.
Darling said he would rather suffer criticism for removing support for the economy too late than too early.
