Market Review – 05/07/2011 21:40 GMT
Euro tumbles after Moody’s cut Portugal’s credit rating to junk
The single currency declined sharply on Tuesday after Moody’s Investors Service downgraded Portugal’s credit rating to junk, igniting renewed fears over the Greek debt crisis, that could spread to other weaker members of the eurozone.
Moody’s cut Portugal’s rating by 4 levels to BA2, 2 notches into junk territory, with a negative outlook saying there is great risk the country will need a second round of official financing before it can return to capital markets.
Earlier in the day, renewed selling interest at 1.4554 in Australian session capped the euro’s intra-day recovery and price then ratcheted lower to 1.4442 in New York morning. Later, despite staging a modest recovery in New York midday, the single currency fell swiftly and sharply from around 1.4485/88 to as low as 1.4395 in late New York session after Moody’s cut Portugal’s government bond rating to junk. Cross-selling in euro versus the Japanese yen, the Swiss franc and sterling also pressured the single currency in late New York trading as eur/jpy, euro/chf and eur/gbp tumbled to the day’s lows of 116.69, 1.2100 and 0.8970 respectively.
The British pound declined from 1.6100 in tandem with the euro in Asian session n despite falling to a session low of 1.5990 in European morning, cable then jumped after the release of slightly higher-than-expected UK CIPS services PMI which came in at 53.9 versus economists’ forecast of 53.5. Later, price climbed to an intra-day high of 1.6128 b4 retreating to 1.6039/40 in late New York trading.
The Swiss franc strengthened against the dollar and euro as investors flocked to the franc as a safe-haven asset. Usd/chf and eur/chf tanked from around 0.8456 to 0.8385 and 1.2238 to 1.2100 respectively in late New York session before staging a minor recovery.
Data to be released on Wednesday include:
BRC Shop Price Index, Japan Leading indicators, EU GDP (rev.), German factory orders, Canada Building permits, U.S. ISM non-manufacturing.