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Market Review - 14/01/2009 18:36 GMT
Euro declines to 1.3093 on downgrade of Greece's credit rating and sharp drop in U.S. retail sales
The single currency fell sharply to 1.3093 on Wednesday due to renewed cross selling in euro as Standard & Poor's said it had lowered its 'A-/A-1' sovereign credit ratings on Greece to 'A-/A-2' together with the release of much-weaker-than-expected U.S. retail sales data, prompting investors to unwind carry trades especially versus the Japanese yen.
Euro remained under pressure on speculation that the European Central Bank policy makers will cut interest rates by at least 50 basis points on Thursday as the economic slowdown deepened. ECB President Jean-Claude Trichet said he did not want to be ‘trapped’ with borrowing costs too low. Euro fell sharply from 119.75 to 116.57 versus the Japanese yen.
U.S. retail sales declined by 2.7% in December, the sixth consecutive monthly drop. Core retail sales (excluding automobiles) weakened by 3.1%, the worst since records began in 1992. The greenback fell against the Japanese yen from 89.97 to 88.60 while the British pound traded inside 1.4493-1.4710 range against the dollar.
Standard & Poor’s cut Greece’s credit rating and threatened to downgrade Ireland, Portugal and Spain. Credit-default swaps on Greece have jumped 168 basis points since September while the swaps for Ireland rose to 217 (swaps for Spain and Portugal increased about 72 basis points to 123.5 and from 81 to 121 respectively). Contracts linked to the debt of lower-rated Mexico and Vietnam also fell in the same period. The Russian ruble dropped to a six-year low against the dollar after the central bank devalued the currency for the third time in four days and the government’s dispute with Ukraine over gas shipments remained unresolved.
Thursday will see the release of Japan’s domestic CGPI, German CPI and HICP, eurozone ECB rate decision and HICP, U.S. jobless claims, PPI, Empire state manufacturing and Philadelphia Fed survey.
Euro declines to 1.3093 on downgrade of Greece's credit rating and sharp drop in U.S. retail sales
The single currency fell sharply to 1.3093 on Wednesday due to renewed cross selling in euro as Standard & Poor's said it had lowered its 'A-/A-1' sovereign credit ratings on Greece to 'A-/A-2' together with the release of much-weaker-than-expected U.S. retail sales data, prompting investors to unwind carry trades especially versus the Japanese yen.
Euro remained under pressure on speculation that the European Central Bank policy makers will cut interest rates by at least 50 basis points on Thursday as the economic slowdown deepened. ECB President Jean-Claude Trichet said he did not want to be ‘trapped’ with borrowing costs too low. Euro fell sharply from 119.75 to 116.57 versus the Japanese yen.
U.S. retail sales declined by 2.7% in December, the sixth consecutive monthly drop. Core retail sales (excluding automobiles) weakened by 3.1%, the worst since records began in 1992. The greenback fell against the Japanese yen from 89.97 to 88.60 while the British pound traded inside 1.4493-1.4710 range against the dollar.
Standard & Poor’s cut Greece’s credit rating and threatened to downgrade Ireland, Portugal and Spain. Credit-default swaps on Greece have jumped 168 basis points since September while the swaps for Ireland rose to 217 (swaps for Spain and Portugal increased about 72 basis points to 123.5 and from 81 to 121 respectively). Contracts linked to the debt of lower-rated Mexico and Vietnam also fell in the same period. The Russian ruble dropped to a six-year low against the dollar after the central bank devalued the currency for the third time in four days and the government’s dispute with Ukraine over gas shipments remained unresolved.
Thursday will see the release of Japan’s domestic CGPI, German CPI and HICP, eurozone ECB rate decision and HICP, U.S. jobless claims, PPI, Empire state manufacturing and Philadelphia Fed survey.
