Forex Market Review – Euro under pressure after Fitch downgrade warnings

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Euro came under pressure early in the US session open and weakened further after Fitch Ratings warned it may downgrade six euro zone countries and warned France is at risk of losing its AAA rating. Italy, Spain, Belgium, Slovenia, Ireland and Cyprus had their outlook revised down to negative. EURUSD opened the North American session at 1.3083, the highest level of the day, and began to fall as the dollar strengthened after the announcement of US inflation data. Euro briefly broke below the key $1.30 level to $1.2994 before recovering above $1.30. Euro is down 2.8 percent on the week, its largest weekly loss since the week of September 5.

 

Dollar had made gains during early North American session after the CPI report showed the cost of living in the US held flat in November.  Dollar gained against most major counterparts, including sterling, yen, Canadian and Australian dollars.

 

GBPUSD fell from a high of 1.5556 to 1.5482.

 

The Canadian dollar fell sharply after data showed foreigners bought less in Canadian securities than had been forecast. Also Canada’s major export, crude oil, fell to US$92.41 from US$94.75, weighed on the currency. USDCAD rose to 1.0405 from 1.0296.

 

Gold snapped a four-day losing streak to rise to $1,600.98 to move off the two-month low reached on Thursday at $1,560. Investors were liquidating gold holdings for USD cash. Since gold and dollar have an inverse relationship, gold had fallen sharply on dollar strength. On the week, gold has dropped over 6 percent, the biggest weekly decline since late September.