The euro is likely to post further losses in the coming weeks after it dropped to its lowest rate against the US dollar in nearly 17 months and tumbled to an 11-year low versus the yen following a downgrade in credit ratings of nine Eurozone countries.
As widely expected, Standard and Poor’s said it has downgraded the credit ratings of Eurozone countries led by France, Spain, Italy and Austria. S&P, however, left Germany’s AAA credit rating unchanged, ‘with a stable outlook’.
Speculation about the downgrade roiled the forex market earlier in the session, and the actual ratings news provoked little market reaction. But analysts said the more serious blow to the euro’s cause was the breakdown in talks between Greece and its creditor banks to slash the country’s huge debt. Greece has warned of ‘catastrophic’ results if a deal to swap bonds is not reached soon.
It’s not all bad news for the euro, it did climb a little after a solid sale of Spanish and Italian debt and more upbeat comments about the euro-zone economy from the European Central Bank chief eased concerns about the region’s debt. Be aware the firms like FXCM and Spread Co normally offer short-term and medium term markets on the euro/dollar rate.
The ECB, held rates steady at 1 percent as widely expected after two successive rate reductions, with bank president Mario Draghi citing ‘signs of stabilisation activity at low levels’ in the Eurozone economy. Draghi also said the ECB’s flood of cheap, three-year money is helping the euro-zone’s banking system substantially and supporting confidence in the bloc’s economy, which is showing some signs of stabilisation.
US data on Thursday disappointed spread trading investors who were seeking signs of an improving economy. US initial claims for jobless benefits hit a six-week high and retail sales rose at the weakest pace in seven months in December. Retail sales increased a less-than-expected 0.1 percent, despite continued strength in auto purchases, a Commerce Department report showed.
Robust factory output and improved hiring have fuelled the view that the US economy has so far resisted a global slowdown as the Eurozone grapples with a likely recession. A Labour Department report that showed a surprisingly sharp increase in initial unemployment claims to a six-week high of 399,000 last week reinforced lingering concerns about the economy.
However, analysts said the government may have had trouble adjusting the claims for seasonal fluctuations following the holiday shopping season.
Contracts for Difference and Financial Spread Trading come with a high degree of risk. They are leveraged products so you can lose more than your initial stake. Always speculate with money you can afford to lose. Before trading make sure that you recognise the risk. CFD Trading and Financial Spread Trading might not always be suitable for your trading needs. Obtain independent guidance where you think it is necessary.
