Euro spirals down as Greece’s credit rating downgraded

The Euro has fallen against the Yen and the Dollar as Greece’s credit rating has been downgraded to a non-investment rate.

Pound Sterling – UK Markets

The Pound has made strong gains on the Euro overnight although this has started to tail off this morning. The new Office for Budget Responsibility’s first data set released yesterday has set a bleak picture for the upcoming emergency budget on the 22nd June. Growth forecasts made by the last Government have been slashed by nearly half a point from 3.25 percent to 2.6 percent meaning that the new Chancellor has an £12 billion gap to fill from spending cuts and tax rises, with an extra £2.4 billion to raise next year. Borrowing however came in at £23 billion less than feared but a tough budget is still expected to tackle the growth reduction and the amount of structural debt. There are further data releases due today in the UK covering the consumer prices, house prices and retails prices.

US Dollar – US Markets

The Dollar lost against the Pound overnight but is beginning to gain ground this morning. The Dollar is continuing to make gains on the Euro since last night after the credit downgrade in Greece has caused money to flow away from the single currency. US Data to be released today which may cause market movements includes the API Crude Oil Index which indicates oil demand and price volatility as well as TIC flows by the US Department for treasury showing flows of financial resources therefore painting a picture of the state of the deficit.

Euro – European Markets

Moody’s Investors have cut Greece’s credit rating down to Ba1 which is a non-investment grade due to their perception of ‘substantial’ risks to the nation’s economic growth. A German report is also due today which is expected to reveal that investor confidence in the German economy has declined to the lowest in a year highlighting the problems for all single-currency nations. German Chancellor Angela Merkel and French President Nicolas Sarkozy have made plans to call upon the G20 to introduce a global bank levy and financial transaction tax.

Other Currencies – Highlights

The drop in the Euro to some of the lowest levels in the last four years has caused investors to diversify and seek alternative currencies not as directly affected by the collapse in the Euro region. Canadian Dollars and Swiss Francs made up record shares of global bond sales yesterday. Currencies other than US Dollars and Euros accounted for 29 percent of the total. The Australian Dollar has fallen after the nation’s central bank suggested that the situation in Europe will affect the global growth outlook.