The euro fell today, following yesterday’s gains, after Fitch Ratings downgraded Italy’s credit rating. The currency held steady against the Japanese yen and the Great Britain pound.
Fitch downgraded Italy’s long-term foreign and local ratings to BBB+ from A-, while the outlook remained negative. The agency cited among other reasons for the downgrade:
The inconclusive results of the Italian parliamentary elections on 24–25 February make it unlikely that a stable new government can be formed in the next few weeks. The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession.
Q412 data confirms that the ongoing recession in Italy is one of the deepest in Europe.
Among positive factors, supporting the rating, was:
The relatively wealthy, high value-added and diverse economy with moderate levels of private sector indebtedness.
The euro rallied yesterday against the US dollar, but failed today. It looks like the shared European currency is ready to rise against the yen for a fifth consecutive day.
EUR/USD fell from 1.3044 to 1.3032 as of 1:35 GMT today. EUR/JPY went up from 125.57 to 125.87, while EUR/GBP was flat at 0.8741.
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