The Greece government tried to reassure markets over its sincerity to resolve its debt issues. The government said that it would step up plans to privatise companies in an effort to raise funds. The news was welcomed and helped turn around weak investor sentiment, which had been damaged earlier in the day by another downgrade. The outlook for Belgium debt was placed on “negative” by a rating agency, which quickly took the euro to fresh record lows against the Swiss franc as well as 10-week lows against the dollar and sterling.
Sterling
Lacking local economic data to inspire sterling differently, the currency traded to eight-week lows against the dollar as it tracked euro/dollar developments. British markets have some data to look forward to that should inspire trade.
US Dollar
The US dollar touched an eight-week high against sterling while achieving a 10-week high against the euro. The dollar’s gains were more “default” in nature and largely had to do with euro weakness. The huge “risk off” environment that came to markets as a result of the heightened fears in Europe helped lift the US dollar.
Euro
Weaker than expected flash PMI manufacturing and service sector surveys in the eurozone contributed to what was already a “risk-off” environment that was weakening the single currency. Fitch’s three-notch downgrade of Greek debt and a downward revision to Italy’s outlook was joined by an outlook downgrade for Belgium, which just added insult to injury and continued to weigh on the euro taking it to two-and-the-half-month lows against the US dollar and sterling.
Japanese yen
The Japanese yen has reacted calmly to news that the government revised lower it capital expenditures forecast for the first time since December 2009. The overall assessment of the Japanese economy was unchanged, however. The ongoing supply constraints that have resulted from the fallout from March’s natural disasters and nuclear crisis will weigh on business’s ability to invest.
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