Forex - GBP/USD near 31-month lows after Moody’s downgrade

The pound eased against the dollar on Monday, but remained close to 31-month lows after ratings agency Moody’s cut the U.K.’s triple-A sovereign rating late Friday, while concerns over weak growth and persistently high inflation also weighed.

GBP/USD pulled away from 1.5074, the pair’s lowest since July 2010, to hit 1.5147 during European morning trade, down 0.18%.

Cable was likely to find support at 1.5074, the session low and resistance at 1.5272, Thursday’s high.

Moody’s cut the U.K.’s sovereign rating by one notch to Aa1 with a stable outlook late Friday, citing a weak outlook for growth and a rising debt burden.

"There is a risk that the U.K government may not be able to reverse the debt trajectory before the next economic shock or cyclical downturn in the economy," Moody’s said.

Earlier last week, the minutes of the Bank of England’s February meeting indicated that policymakers are moving closer to another round of monetary easing. In addition, the central bank’s quarterly inflation report this month showed that policymakers are prepared to overlook higher inflation in order to support growth.

Elsewhere, sterling was trading close to 16-month lows against the euro, with EUR/GBP rising 0.43% to 0.8727.

Sentiment on the single currency remained fragile as investors eyed the outcome of a closely contested election in Italy, amid concerns that a hung parliament could hamper efforts to implement further economic reforms and lead to instability in the bloc’s third largest economy.