The Euro extended losses against the Dollar in the US trading session after ratings agency Moody’s downgraded Portugal’s credit rating by four levels to junk status, from BAA1 to Ba2. Moody’s cited there is great risk the country will need a second round of official financing before it can return to capital markets and will not be able to borrow at sustainable rates anymore. The news rattled the Euro, since markets now fear that after Portugal, Spain could be next, and fear of debt contagion pressured the Common Currency. EURUSD plunged from 1.4486 pre-news level to a session low of 1.4395.
Sterling erased gains made from the previous session, falling against the Dollar in New York trading. The Pound was given a boost this morning after better than expected Services PMI increased in June. However, the British currency’s rise was short lived as the UK economy is in a slump and growth outlook looks dim, with the prospect of the BoE keeping interest rates unchanged until next year. Risk aversion pushes investors away from riskier currencies like Sterling, into safer ones like the Dollar. GBPUSD fell from 1.6124 to 1.6038 during the US session.
The Swiss Franc pushed higher versus the US Dollar all day today, making gains of over 124 pips since the Asian session, when USDCHF fell from a high of 0.8505 down to the US session low of 0.8383. The Swiss Franc is considered a safe haven currency and strengthens in times of crisis, the Eurozone and China and even U.S. debt concerns. The Swissy also gained against the Euro from the start of the Asian session today. EURCHF dropped around 240 pips to lows of 1.2098 from Asian highs of 1.2338.
The Canadian Dollar has been weakening against the US Dollar since Friday. After a brief retracement, USDCAD rose towards the end of the US session as the loonie softened due to lingering Eurozone debt issues and news today that China’s debt is slowing growth. Also late in the session news came out that Moody’s downgraded Portugal to junk status, boosting the greenback as investors turn to safer currencies on risk aversion. USDCAD shot up from 0.9600 to 0.9636.
Gold extended gains into the US session, rising to a high of $1,516.48 from the session open price of $1,504.13. Gold has been on the rise since Friday as investor concerns over Greek debt and overall global economic recovery pushed them to the safe haven asset. Now with Portugal in danger of a default according to Moody’s, has lifted the precious metal’s value further.
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