Good Week for Euro Spoiled by Credit Rating Cuts

The euro erased its gains versus most major currencies today as Fitch Rating downgraded credit ratings of Italy and Spain, reminding traders that the story of debt problems in Europe is far from over.
Fitch reduced Italy’s credit rating to A+ from AA- and cut Spain’s rating to AA- from AA+. The outlook for both nations is negative. The potential danger of the Eurozone debt crisis was one of the reasons that have caused the rating agency to reduce the rating. The rating cuts renewed concerns about possible spreading of the crisis across whole European Union.
This week was surprisingly good for the euro, considering there weren’t any major positive news for the currency. It’s true that there were good report from the US, particularly today’s
non-farm payrolls. But problems in Europe itself remain, while European officials do more talking than acting. The decrease of European nations’ credit ratings returned power to euro bears as the weekly gains of the common 17-nation currency were reduced today and even were erased against some currencies.
EUR/USD closed at 1.3377, falling from the opening price of 1.3437 and the intraday maximum of 1.3523. EUR/JPY closed at 102.65 after it opened at 103.07, while the daily high was 103.85. EUR/GBP posted an impressive slump by 1.17 percent from 0.8697 to 0.8595.

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