Could UK's AAA downgrade send sterling to $1.40?

Old Mutual Global Investors' Stewart Cowley has predicted sterling could fall substantially from here versus the dollar as a result of the UK's credit rating downgrade.

While Moody's decision to cut the UK's AAA-rating to Aa1 was hardly a surprise, it nonetheless weighed on the currency today, pushing the already weak pound below $1.51 for a time. The pound hit a low of $1.5073 in today's trading, before climbing off lows to trade just above $1.51. Sterling has already retreated sharply from its recent peak of $1.63 in December, shedding around 7%. However, Cowley (pictured) - head of fixed income and macro at Old Mutual Global Investors and a bear on sterling for some time - said the downgrade will erode confidence in both gilts and sterling, and...