Euro retreats sharply after S&P cuts Spain's rating
The single currency fell sharply in late New York afternoon after credit ratings agency Standard & Poor's cut Spain's credit rating by two notches to BBB minus soon after the close of U.S. market.
Ealier in Asia, although the single currency resumed its recent decent and fell to session low at 1.2835, price rebounded to 1.2879 in early European morning. Euro then ratcheted higher in European session and eventually hit an intra-day high at 1.2913 in New York morning on short-covering as investors waited for a decision on whether Spain would ask for a bailout after Spainish Prime Minister Mario Rajoy's meeting with French President Francois Hollande in Paris, however, price pared intra-day gains and dropped to 1.2862 in late New York afternoon after S&P downgraded Spain's soveriegn rating to BBB minus.
S&P lowered kingdom of Spain to BBB-minus with a negative outlook and said 'the deepening economic recession is limiting the Spanish gov't's policy options; rising unemployment n spending constraints likely to contribute to friction between Spain's central n regional gov'ts; sees mounting risks to Spain's public finances, due to rising economic n political pressures.'
Despite cable's brief fall to an intra-day low at 1.5976 in Asian morning, failure to re-test previous day's low at 1.5975 prompted short-covering and price rebounded to 1.6017 in European morning. The British pound rose further in tandem with euro to session high at 1.6035, however, price trimmed intra-day gains and retreated to 1.5993 in late New York afternoon.
Versus the Japanese yen, although the greenback edged higher in European session and hit session high at 78.37, dollar fell to an intra-day low at 78.12 in New York afternoon due partly to the selloff in U.S. equities.
DJI closed the day down by 128 points or 0.95%.
In other news, Fed releases its Beige book, which stated 'U.S. economic activity expanded modestly in most districts; New York saw leveling off, Kansas city cited slowing; consumer spending was generally flat to up slightly in September; employment conditions little changed; some blamed stagnant demand n policy uncertainty for hiring restraint; a number of districts said retail sales were expanding modestly; New York, Chicago n Kansas city indicated flat to softer sales; real estate conditions improved in last month; most districts reported strengthening in existing home sales; manufacturing sector conditions were mixed but on balance somewhat improved since prior report; districts reported little change in prices of both finished goods n inputs.'
On the data front, U.S. wholesale inventories were reported at 0.5% vs forecasts of 0.4%.
Data to be released on Thursday :
Japan machinery orders, consumer confidence, Australia unemployment rate, New Zealand ANZ consumer confidence, Germany CPI, HICP, French CPI, Canada new housing price index, exports, imports, trade balance, U.S. export price index, import price index, jobless claims, trade balance and Fed budget.