The US dollar index opens at seven-week highs as the greenback dollar has benefited from the euro’s demise. The euro has fallen under heavy selling pressure after Fitch downgraded Greece’s sovereign debt rating by three notches. Additionally, the IMF has said that it will suspend its investigation of Greece’s progress, while the Greek Prime Minister meets with Cabinet officials to discuss the country’s next steps in reigning in spending and privatisation measures. Core EU countries are starting to be impacted. Spain’s ruling party saw its worst election results in 30 years, while Italy’s outlook was lowered by rating agency Standard and Poor’s. The heightened fears over the European debt crisis will continue to be the main focus for investors this week. The UK and US face second estimates for first quarter GDP data later in the week. In Switzerland, the franc is at record highs against the euro as investors seek safe havens.
Sterling
Sterling is trading near two-month highs against the euro, while trading within recently seen ranges against the US dollar.
US dollar
Markets have thus far been willing to overlook the immediate problems facing the US, although US debt problems will also help to limit the dollar’s upside potential.
Euro
The euro is facing extreme selling pressure. Fitch downgraded Greece’s sovereign debt rating by three notches at the end of last week, while Standard and Poor’s lowered its outlook on Italy’s sovereign debt rating. Norway suspended $42-million in economic and social grants to Greece after Athens did not fulfil commitments and could have even broken rules required for the aid. The talk of debt restructuring has faded somewhat with the European Central Bank adamantly opposed to the idea. Rating agencies have warned that even a “soft” restructuring or re-profiling would be considered a ‘default’ in their books.
Japanese yen
The Japanese yen is benefiting from the renewed risk aversion flows. Japanese investors are bringing back money from abroad, which is bolstering the local currency.
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