S&P affirms US sovereign rating at AA+ with stable outlook

Early Wednesday morning in Asia, late-Tuesday for the rest, global rating agency Standard and Poor, mostly known as S&P, confirmed the US sovereign rating at AA+/A-1+ while keeping the outlook stable.

In doing so, the rating giant confirms America is lesser rated than Australia while saying, “Ratings for the US are constrained by high general government debt and fiscal deficits, both of which worsened in 2020,” per Reuters.

The news also quoted S&P while stating, “Outlook for the US remains stable, reflecting the expectation of rapid economic growth this year and next as the pandemic recedes.”

Despite sluggish news, upbeat statements couldn’t be ignored from the S&P report mentioning, “Expect gradual withdrawal of unprecedented US fiscal stimulus to stabilize net general govt debt burden around 110% of GDP in next couple of years. US dollar's status as the world's premier reserve currency, and size and depth of the US financial market, should sustain policy flexibility.

FX implications

Following the news, AUD/USD drops to 0.7739, from 0.7745, as it heaviest the risks and favors the US dollar due to safe-haven demand. However, the market reaction to the news could have been more visible if the pre-Fed trading lull isn’t active.

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