Moody's downgrade Germany as Finland remain only AAA rated nation in Europe with a stable outlook
25/Ιούλ/2012 • Currency Updates•
The U.K. didn’t really publish anything to move the markets significantly yesterday. The markets displayed a small reaction to the BBA mortgage approvals report, even though results failed to match forecasts. Today, the most important figure is released in the morning, the UK quarterly GDP report; according to most we are likely to see a third straight month of contraction in the UK economy as all indicators have been poor of late.
The Euro is continuing its downward trend as it just hit a new 25-month low against the dollar yesterday. More bad news for the Euro as Moody’s downgraded the credit ratings of Germany, Holland and Luxembourg from AAA to AAA-, Moody claims that the three economies are most exposed should Spain or Italy be in need of full scale bailout.
This means that most of the guarantors of the European Financial Stability Facility fund have had their outlook changed from stable to negative. This subsequently led to a downgrade of the EFSF by Moody’s who changed the funds Aaa outlook from stable to negative. Finland is the only guarantor who still holds an AAA stable rating and the only AAA stable sovereign still left in the Euro-zone.
On the economic front, most of the region’s services and manufacturing PMIs for June also fell short of expectations. The reports only fuelled concerns for the euro zone even more as they reminded investors that economies are already lagging in the midst of rising debt woes.
The most significant data released yesterday was the manufacturing purchasing managers’ index, which came in slightly worse than expected. This just goes to show that manufacturing industries are still not picking up and business across the pond is generally a bit slow. Today the new home sales figure is released at 2.00 pm GMT. A slight rise is expected by most and rising new home sales usually have a positive effect on the markets as it’s a good trigger for consumption.
It has been a good start this week for the dollar but some are pointing out the risk of a mid-week reversal as the forecast for tomorrows durable goods orders are forecasted to decrease.