* Sterling close to flat versus euro, dollar
* Investors focus on BoE, ECB policy decisions
* Fitch warns on UK's triple-A rating
By Philip Baillie
LONDON, Dec 6 Sterling steadied against the euro
on Thursday but looked vulnerable after a gloomy autumn budget
statement prompted ratings agency Fitch to warn that the UK
could lose its prized AAA rating.
Strategists said moves in the pound against the euro were
likely to be muted ahead of Bank of England and European Central
Bank rate decisions later in the session.
The euro was close to flat on the day at 81.14 pence
, having risen to a one-month high of 81.47 pence on
Analysts said the pound could come under further pressure
after rating agency Fitch said Britain's credibility had been
damaged by finance minister George Osborne's new forecasts,
which showed the country would not meet a key debt reduction
"The triple-A rating is everything. It is what has supported
sterling from selling off over the last few years and if that
were to go you would see gilt yields rising and sterling
dropping like a stone," said Christian Lawrence, currency
strategist at Rabobank.
Fitch has a negative outlook on Britain's AAA credit rating
and has said that it would review this again after Osborne's
2013 budget statement early next year.
The pound edged up 0.1 percent versus the dollar to
$1.6107, off a one-month high of $1.6131 hit earlier this week.
"We see sterling as a little rich at these levels against
the dollar, and still also see risks of euro/sterling gains on
squaring of short euro positions," Lloyds analysts said in a
Despite the flow of bad news about the economy, the BoE is
widely expected to keep total of bond-buying in its stimulative
quantitative easing policy unchanged at 375 billion pounds and
interest rates on hold at 0.5 percent.
Most investors are also betting the ECB will keep rates on
hold at 0.75 percent at its policy meeting on Thursday.
Market players will look for clues about whether ECB
President Mario Draghi will show a greater willingness to cut
borrowing costs in the future, which could knock the euro
Before that traders will focus on UK trade balance data for
October due at 0930 GMT. Analysts said the trade deficit is
expected to widen but the figures were unlikely to move sterling