CAD Attempts to Rally, Again Without Success

The Canadian dollar attempted to rise yesterday as the European leaders gathered to discus possible changes to the European Union regulations, but the currency dropped back as Standard & Poor’s put the credit ratings of the EU countries on review.
France’s and Germany’s leaders talked about possible ways to bring closer integration of the Eurozone countries and that was positive for the loonie (as the Canadian currency is often nicknamed for the image of the aquatic bird on the C$1 coin).
But then S&P stepped in, announcing that it placed the long-term sovereign ratings on 15 members of the Eurozone on review with negative implications. The rating agency provided various reasons for such decision, including “tightening credit conditions” in the region, the inability of the European policy makers to reach a consensus regarding the measures to deal with the credit crisis and the rising risk of a new recession. S&P also wrote: “Currently, we expect output to decline next year in countries such as Spain, Portugal and Greece, but we now assign a 40% probability of a fall in output for the eurozone as a whole.”
The announcement disappointed market participants and the previously positive sentiment gradually dissipated. The S&P 500 Index closed up 1 percent after rising during the day as much as 1.8 percent. Crude oil futures erased the previous gains and traded fell 0.5 percent to $100.62 per barrel in New York.
USD/CAD rose from 1.0162 to 1.0170 and CAD/JPY traded at 76.42, following the yesterday’s decline from 76.68 to 76.52, as of 00:37 GMT today. EUR/CAD was at 1.3626, while yesterday it was down from 1.3643 to 1.3617 as the news had a greater effect on the euro than on the loonie.

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