EU Morning Report- Spain downgraded, eyes on US GDP

The euro (EUR) slid against its major counterparts yesterday after credit rating agency Standard & Poor’s cut Spain’s credit rating to BBB+ from A. Spain is now on a negative outlook as S%P is expecting the country’s economy to contract during 2012 and 2013. Risk aversion in the market is heightened as investors fear that the downgrade is likely to push Spanish bond yields higher. Versus the dollar, the euro fell from a three-week high at 1.3262 to 1.3159.

The US dollar (USD) strengthened against a basket of currencies after US reports showed stronger than expected company earnings. Economic data from the US also supported the greenback following surprisingly strong home sales figures. Against the Japanese yen (JPY) the greenback jumped as high as 81.44 from 80.66 following the Bank of Japan interest rate decision before giving up some of its gains to trade at 80.71. BoJ decided to keep interest rates unchanged but expanded its asset purchasing program by 10 trillion yen. The central bank’s move to ease its monetary policy further shows concerns over the country’s slow growth and concerns over the persistent deflation. Focus now turns to today’s Gross Domestic Product data from the US.

The Australian dollar (AUD) edged lower against the dollar to 1.0358 from 1.0399. The Aussie appears under pressure on expectations for an interest rate cut by the Reserve Bank of Australia. The recent inflation data showed a softer than expected inflation signaling the need for the central bank to ease its monetary policy at their next policy meeting next week.

Oil edged lower to 103.62 dollars a barrel from 104.90 during the US session. Gold (XAU) rose to 1660.65 dollars an ounce from 1642.45 and against the euro it edged higher to 1253.31 euro an ounce from 1243.59. Silver (XAG) jumped to 31.28 dollars an ounce from 30.64. Stay in tune throughout the day with !

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