This had a whirlwind effect on the markets with the FTSE falling nearly 3% and sterling tumbling across the markets. Official data showed that the treasury borrowed £8.5 billion last month and the S&P; warned that the debt rating would be downgraded if the next governments’ fiscal plans do not show a secure downward trajectory in the medium term.

A downgrade would be a huge blow to the status of Britain and would lead to the Treasury being required to pay higher interest on future borrowings.

The response from the UK government and head of the DMO affirmed “There are significant uncertainties in the global economy at the present time and S&P; point out that the outlook could be revised back to stable ‘if fiscal outturns are more benign than currently (they) currently anticipate’,” – let us hope Mr. Darlings growth forecasts are correct!

In other news data today confirmed that GDP in the UK dropped 1.9% in the first quarter of this year- this was exactly in line with forecasts and has not moved the markets.

Japan has upgraded its economic outlook and is forecasting that exports are forecasted to pick up- this follows a massive fall in exports in Q1 and a 4% fall in output- this should be Yen positive as it underlines the safe haven status of the Yen and will encourage more Yen leveraged carry trades- particularly into AUD.

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