MORNING BRIEFING: Spain downgraded, France & Germany might be preparing for austerity measure themselves

[RTFX-Trading]

MORNING BRIEFING:  Spain downgraded, France & Germany might be preparing for austerity measure themselves

What’s new:
Euro Zone: Spain Downgraded, France & Germany reportedly contemplating Austerity measures as well
France: French Minister admits that France keeping its AAA rating would be “a stretch”
US Dollar: Expected to keep finding support from eventual policy rate divergence, and gains in economic           momentum
British Pound: Still intact despite treasury minster resigns
Japan: Industrial Production figures positive but weaker than expected (+1.3 % actual +2.5% consenus)

Today:



Rates in Asia and Indices:
EURUSD: 1.234 - 1.2267.
USDCHF: 1.1594 - 1.1540.
GBPUSD: 1.4504 - 1.4427.
EURJPY: 112.92 - 111.58.
USDJPY: 91.61 – 90.92.
DowJones: 10’136.63 -1.19%
NASDAQ: 2'257.04 -0.91%  
S & P 500: 1'089.41 -1.24%
Nikkei: 9'768.70 +0.06%
Shanghai: 2'644.64 -0.42%
Gold: $ 1'214.40
Brent Oil : $ 74.46
 
Comments:

Fitch downgraded Spain on Friday From AAA to AA+ with a stable outlook citing a more muted economic recovery - Spain’s Debt however remains at investment grade. France’s Minister was quoted as saying that maintaining AAA rating for France would be a “stretch” unless it takes disciplinary actions on its budget decisions.  Even Germany is hinting at possibility of tax Hikes to address deficit. Contagion from Greece’s difficulties has hence not only spread to the ‘weaker’ euro zone countries but they have also left their mark on the largest euro zone members.

EURUSD reached lows of 1.2269 Friday evening, in the early Asian session the Euro regained some support in the early hours, which it was close to reversing some time after at the time of the writing of this commentary. Analysts keep seeing support for the USD both as a result of an expectation of eventual policy rate divergence, but also on signs economy is regaining momentum.

Japanese Yen falls against its major counterparts on the back of disappointing industrial production figures, which although positive have come below the consensus. Not only the figures reduced support for the Japanese Yen, the ruling coalition Government is facing some political turmoil after one of its junior parties abandoned the coalition government after its leader was ousted from his cabinet post after refusing to endorse a plan to relocate a US marine base in Okinawa.

United States and United Kingdom are on holiday today.

Good day,


Rudolf Muscat

Trading desk

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