Friday, 17 Dec 2010

Euro Erases Gains Following Ireland Rating's Downgrade

The euro has erased all of its daily gains against the major currencies after Moody's Investors Service Inc. downgraded Ireland's sovereign debt from Aa2 to Baa1. The euro dropped about 120 pips vs. the U.S. dollar, and the EUR/USD pair is trading near the 1.3250 level.

The rating company slashed Ireland's ratings by five notches, citing increased uncertainties over the country's economic outlook and public finances.

The euro has slightly strengthened in the early trading session after German business morale rose to its highest level since 1991. The German confidence unexpectedly increased to 109.9 from 109.3 in November, beating projections of 109.2. Nevertheless, the euro's appreciation was promptly halted due to the rating's cut, and at the moment the euro's gains have been erased.