Tuesday, 28 Sep 2010

Renewed Downgrade Concerns Pressure EUR

The euro came under wave of selling pressure during Asian trading Tuesday due to renewed fears about euro-zone downgrades; however, it since then recovered most of its losses and is currently trading around $1.3470. The drop came following reports by a Spanish newspaper stating that analysts expect Moody's to reduce Spain's triple-A credit rating later this week. Further pressuring the euro were statements by Standard & Poor's analyst of a possibility of further downgrade of the Anglo Irish Bank's ratings.

The euro dropped as far as $1.3381, however, since returned to late Monday's level of $1.3471. The single currency was also down at 112.92 yen from 113.25, but since recovered all losses and is currently trading at 113.26.

Sterling rallied after a report showed the U.K. current account deficit narrowed unexpectedly in the second quarter. The deficit came in at £7.4 billion ($11.73 billion), down from revised £11.3 billion in the first three months of the year. The CBI realized sales also showed a better than expected result, coming at 49, a much better result than the expected 27.

Later today results are expected for the CB consumer confidence, due at 14:00 GMT. The result is supposed to show a decline in sentiment, which might add to the existing negative sentiment on the USD. If the result is on par with expectations or lower, the EUR/USD pair may see a price above $1.3500.