Ireland Rated ‘Junk’

Just weeks after ratings agencies downgraded Portugal’s debt to ‘junk’, Ireland has now followed suit. Rating’s agency Moody’s has based its decision on the strong possibility that Ireland will require a second bailout package before it is able to return to the capital markets. Whilst many in the European Union disagree with the recent downgrades, we are finding it very difficult to see any argument against it. The bottom line is, should nations be unable to meet deficit reduction targets they are causing disruption in the marketplace.

Pound Sterling – UK Markets

Whilst the majority of us would assume that we can sit back and watch the Eurozone debt crisis unravel before our eyes without being affected, George Osborne begs to differ. He has called upon European finance chiefs to come up with a firm plan to solve the crisis stating that the UK and world economies are not immune to potential contagion. Although bonds have retained investor confidence, the UK economy has failed to grow recently and consumer spending power is being erased as wage growth fails to keep up with prices. Economists this morning had stated that they expected jobless claims to fall this month easing concerns that the economic recovery is stalling. However, you probably know what I am about to say; our trusted economy has once again failed us. Data released this morning has revealed that claims were actually higher than last month and sterling has fallen in tandem.

US Dollar – US Markets

Senate Republican leader Mitch McConnell has eased the pressure on President Barack Obama by stating that he will allow him to raise the national debt ceiling as a “last-choice option”. This has come as a surprise seeing as usually these matters go right to the wire. However, despite giving the President the permission he so desperately needed, the two parties are still at odds over tax increases and cuts to entitlement programs. The US Dollar will look an even more appealing prospect to investors now as many will feel that this has all but relieved some of the pressure that was mounting.

Euro – European Markets

This week will reveal extremely important figures about the state of the European banking sector. This Friday, the results of another round of bank stress tests will be released. The aim of the tests is to reveal how banks would absorb potential shocks on potential credit and market risks. It is thought that the previous examination was not a true reflection of an actual crisis and that this round will see a more transparent set of results and the methods behind the tests themselves. The Eurozone faces a unilateral crisis and European Central Bank President Jean-Claude Trichet looks to be sweating over how to prevent an all out collapse. Furthermore, soaring interest rates endanger the funding programs of Europe’s most indebted nations. The bottom line is the ECB may have to restart the debt restructuring program because at present, the current one is failing.

Other Currencies – Highlights

Rebounding from yesterday’s news the Australian and New Zealand Dollar both rose after China reported economic growth and industrial output increased more than analysts predicted. The currencies ended four and three day respective slides. Asian currencies also regained some overall strength on growing optimism the world’s fastest growing economy and soaring interest rates will attract overseas investors.