The euro recovered losses made after Standard & Poor’s announced a downgrade in Spain’s credit rating by a notch to AA- from AA , renewing investor concerns of the scope of the euro zone’s debt problems.
Euro bounced back in the European trading session as some short-term speculators bought it back ahead of a G20 meeting of finance ministers and central bank heads in Paris.
The S&P downgrade was not a great surprise and was expected by markets which soon dismissed it and reverted back to buying the euro on optimism that the G20 summit will result in some resolve to the euro zone debt crisis or at least provide an opportunity for officials to agree on the outlines of a plan in time for a European Union summit on October 23.
the market is looking toward expected capital injections by governments in the eurozone, which would be supportive for the euro.
Meanwhile, euro zone inflation data was released today. Consumer prices jumped 3.0 percent in September, in line with expectations. Eurostat first reported CPI data in its CPI Flash estimate on September 30, which likely influenced the European Central Bank to maintain interest rates at 1.5 percent earlier this month.
Fuel costs for transport, electricity and heating were among the biggest drivers of the rising prices in September, but many economists say inflation has now peaked as Brent crude prices fall on cooling demand.
Europe’s trade balance figures were also released today. The 17-nation euro zone posted a 3.4 billion euro deficit in August, the European Union’s statistics office Eurostat said in a first reading of the data that is not adjusted for seasonal swings. That was still less than the 4.0 billion euro deficit forecast by a Reuters poll of economists.
July’s surplus, adjusted for seasonal swings, was 2.5 billion euros, down from the 4.3 billion euro surplus initially reported by Eurostat last month. The August deficit was shallower than the 6.3 billion euro deficit in August last year, Eurostat said.