EU Morning Report – Eurozone downgrade fears materialize

The euro recorded minute gains against its major counterparts as the markets open, following the downgrade of 9 eurozone nations by S&P on Friday. More specifically Italy, Spain, Portugal and Cyprus experienced a 2-notch downgrade, while Germany kept its triple A rating untouched. The move sparked a plethora of comments by EU officials, focusing on the timing of the downgrade and the need for a European credit rating agency. S&P justified the mass downgrade, mentioning unconvincing policy initiatives by European leaders to tackle the continuing debt crisis in the eurozone. Meanwhile, negotiations between Greece and the Institute of International Finance (IIF) appear to have been halted citing unconstructive response. With so many balls in the air, the next EU summit -planned to take place on January 30th – is expected to be yet another focal point in this seemingly never-ending thriller. The euro reached 1.2055 against the Swiss franc on Friday, after a week of confusion following Hildebrand’s wife scandal, his resignation and apparent market appetite to test the 1.20 floor he had set.

The US dollar produced a softer opening against a basket of currencies on a day that US banks will be closed in observance of Martin Luther King Day. Versus the Japanese yen, the US dollar opened slightly lower at 76.97. The Japanese Prime Minister Noda shared his fears over Japan’s credit rating after eurozone mass downgrade and called for the parliament to perform fiscal policies changes urgently.

The Australian dollar opened lower at 1.0290 versus the US dollar.Australia’s Treasurer Shorten took the opportunity to point out “Australia’s rock solid economic fundamentals” in response to S&P’s action, also mentioning “the fiscal challenges facing Europe and other parts of the world’.

Oil prices opened higher at 98.79 dollars a barrel from 98.39. Gold opened lower at 1638.25 dollars an ounce from 1638.82. Silver opened lower at 29.6150 dollars an ounce from 29.7275.

Equities	EUROPE				US				ASIA3
	FTSE 100	-0.46%			S&P 500	-0.49%			NIKKEI	-1.43%
	DAX	-0.58%			DJIA	-0.39%			HIS	-0.99%
	CAC	-0.11%			NASDAQ	-0.51%			CSI 300	-2.03%

Labels: downgrade, EU, Eu forex outlook, eurozone, eurozone crisis, forex markets