EU Morning Report - S&P downgraded Spain

The euro (EUR) is weakening against most of its major counterparts, following the downgrade of Spain’s sovereign rating by the S&P. The rating agency slashed the troubled nation’s credit rating by two notches to BBB minus, one notch above non-investment (junk) grade. The worsening economic conditions, rising unemployment and the uncertainty regarding the government’s intentions for an official bailout request were the key reasons behind this move.

§ The Australian dollar (AUD) is strengthening across the board, even as the unemployment rate increased unexpectedly to 5.4% from 5.1%. Given the softening labor market and recent rhetoric by the Reserve Bank of Australia (RBA) there is heightened speculation among market participants that the central bank will proceed with another rate cut in November.

§ Oil had a volatile day, recoding a high at 93.64 following rising tensions in Syria and then plummeting to 91.02 dollars a barrel. The situation in Middle East, that now includes Turkey’s aggressive stance, is extremely fragile. Investors are trying to gauge the effect this will have on the supply of Oil, in the same time, they are trying to estimate the effect on demand coming from the worsening economy worldwide.

Stay in tune throughout the day with foreign exchange bullets!