S&P Lowers Rating on Spain - Euro Drops

Daily Forex Fundamentals | Written by GFT | Jan 19 09 12:52 GMT |

Standard and Poors lowered the sovereign bond rating on the Kingdom of Spain from its highest level of AAA to AA+. S&P noted that “Current economic and financial market conditions have highlighted structural weaknesses in the Spanish economy that are inconsistent with a AAA rating.” The lowering of Spanish debt follows similar moves that cut Greek debt to A- and a waring on Portuguese debt only a week ago. The S&P also also reduced the outlook on Ireland's rating to negative from stable. The move highlights the growing tensions within the EZ as various members of the union struggle to combat the fallout from the global credit crisis that has devastated the European banking sector. Today's news also puts into focus the question of whether the euro, as a currency without a country, can withstand the stress of the current economic slowdown The EUR/USD pair declined in the immediate aftermath of the news and remains near day's lows as traders become increasingly concerned about the credit worthiness of the individual members of the union. If the credit rating gap between the Northern and Southern members of the Eurozone continues to expand the downward pressure on the euro is likely to escalate with the pair foreseeably dropping into 1.2000's region by end of this week, if those concerns are not allayed. Boris Schlossberg http://www.gftforex.com DISCLAIMER: GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading and GFT Global Markets UK Limited. GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS Licence 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. © 2008 Global Futures & Forex, Ltd. All rights reserved.