Euro dipped further against the dollar and pound going into the European session, in reaction to negative news flow today. First news overnight was Spain’s downgrade by Standard and Poor’s. Then a report was released just as the European trading session opened, showing Germany’s consumer sentient fell in April.
Spain was downgraded by two notches to BBB-plus from A and S&P gave it a negative outlook. The ratings agency warned that it expects the Spanish government’s budget deficit to deteriorate even more than previously thought due to economic contraction. The euro zone’s fourth-largest economy entered its second recession since 2009 amid the deepest austerity efforts in more than three decades.
Meanwhile, as European markets opened, Spain’s unemployment rate was released, rising to 24.4 percent, the highest in 18 years.
Adding to negative news, Germany’s forward-looking consumer sentiment indicator compiled by market research group GfK fell to 5.6 in May from 5.8 in April, its lowest reading this year. April’s reading was revised downwards from 5.9.
The indicator, based on a survey of 2,000 Germans, fell for the second month in a row after a five-month rally.
EURUSD fell to a low of 1.3156 within an hour of the session open at 1.3184.
EURGBP fell to a fresh twenty-month low of 0.8132.