Timberrr! Thanks to weak economic reports and a surprise from Moody’s, the euro fell like a log against its counterparts yesterday. EUR/USD slipped by 76 pips while EUR/JPY also fell by 75 pips. What the heck happened?
Well, it certainly didn’t help that the euro region printed weak reports. French business confidence and production outlook took a hit in November while the region’s consumer confidence clocked in at -26, which is still around its three-year lows.
Moody’s also joined the bear party when it surprisingly downgraded the credit ratings of five Spanish regions including Catalonia. Since a downgrade could mean higher cost of debt for these regions, Moody’s move was taken as another step towards a Spanish bailout.
Last but not the least is the underperformance of the equities markets. Anticipation of weak corporate earnings and risk aversion weighed on the high-yielding currencies, enough to drag them to the red zone by the end of the day.
At 7:00 am to 8:00 am GMT today we’ll see a parade of German and French manufacturing and services PMI. If the reports print lower than their previous readings, then it will be up to Super Mario, who is due to give a speech at 11:45 am GMT, to save the day for the euro. Will he deliver? Stay at the edge of your seats on this one, folks!