Major Pairs Analysis: France Downgraded By Fitch
ICM Brokers | Jul 15, 2013 04:45AM ET
In May, the European Commission told French President Francois Hollande that he needs to press ahead with an overhaul of the pension system and labor market. The IMF said the French government has no more room to raise taxes to plug its budget deficit. France lost its top credit rating at Fitch Ratings, which highlighted concern about lack of growth and the buildup of debt in Europe’s second-largest economy. Budget risks “lie mainly to the downside, owing to the uncertain growth outlook and the ongoing euro zone crisis, even assuming no wavering in commitment to fiscal consolidation,” Fitch said in a statement.
GBP/USD
Sterling strengthened from a three-year low against the greenback even after a government report showed Britain’s industrial output shrank unexpectedly in May. U.K. government bonds rose this week, with 10-year yields falling the most in four months before the Bank of England publishes the minutes of its July meeting, the first led by new Governor Mark Carney. The pound posted its first weekly advance in a month versus the dollar after Federal Reserve Chairman Ben S. Bernanke said America’s economy still needed stimulus. The pound’s rebound this week against the dollar was driven mostly by Mr. Bernanke’s comments, which led to a selloff in the dollar.
USD/JPY
The Yen started at 99.30 remaining in its range on the edge of the 100 price level after the Bank of Japan held rates and policy. Mr. Kudora’s press conference was on a positive note, as the Bank upgraded their assessment of the economic situation. Leading to a long weekend in Japan, the yen is quiet, trading within range and between its 50‐day and 100‐day. The BoJ raised its economic assessment, stating that the economy is recovering moderately. The yen, however, was notably quiet. Focus next week is likely to be on developments leading to the July 21 upper house election.
USD/CAD
The Canadian fell from its strongest level in three weeks, as U.S. debt maintained an interest-rate advantage over Canadian counterparts on the country’s stronger economic growth prospects. The currency weakened for the first time in five days as the yield advantage of U.S. 10-year notes to Canadian government debt was 12 basis points, compared to a 19-basis-point difference on July 5 that was the highest since 2011. The Federal Reserve outlined a timeline last month for tapering policies that have kept interest rates low to stimulate the economy. The Canadian currency remained lower, even as consumer confidence in the U.S. fell to 83.9 in July from 84.1 the previous month. The Canadian dollar dropped 0.3 percent to C$1.0395 per U.S. Dollar.
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