The euro was able to stave off the dollar’s advances yesterday thanks to some positive comments by German Chancellor Angela Merkel and French President Francois Hollande. Their upbeat comments helped EUR/USD climb 31 pips to finish at 1.2901.
According to Merkel and Holande, Greece is on track to receive it’s next round of bailout funds, as it seems everyone is on the same page and trying to free up cash for the nation. Word on the street is that the decision to give Greece more moolah will be made at next week’s EU summit.
In other news, both French and Italian industrial production figures beat market forecasts, printing monthly growth rates of 1.5% and 1.7%, after they were projected to print declines of -0.2% and -0.5%, respectively. Yes, I know, these are considered second tier reports, but if I was a euro bull, I’d take what I can get!
It wasn’t all good times though, as ratings agency Standard & Poor’s surprised the markets at the end of the New York session when it downgraded Spanish debt from BBB+ to BBB-. This means that Spanish paper is now one level away from being reclassified from investment grade to junk status! Yikes!
If Spanish debt does hit junk status, it could cause all sorts of problem for the country. For one, if it does get rated below BBB-, it would force many hedge funds and investment houses to dump their Spanish holdings as mandated by their policies. This in turn would cause yields to rise even higher which would most likely lead to Spain requesting a bailout.
For today, we’ve got no hard data on tap, but as we’ve learned the past couple of days, you ALWAYS gotta stay on your toes when trading in the forex market! You never know what might happen!