Foreign exchange market to continue to see European debt
http://www.ytwhw.com/ 2012-01-18 11:10:02 AM GMT +0800
Foreign exchange market to continue to see European debt
Forex – The euro is likely to post further losses in the coming week after it dropped on Friday to its lowest 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 euro zone countries. As widely expected, Standard and Poor's said it has downgraded the credit ratings of euro zone countries led by France, Spain, Italy and Austria. S&P, however, left Germany's triple A rating unchanged, with a stable outlook. Speculation about the downgrade roiled the currency 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.
On Thursday the Euro had climbed to a one-week peak against the US dollar as 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. 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 euro zone 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 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 euro zone 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.