Euro slips on French rating downgrade, central | Money News

By Rae Wee and Jaspreet Kalra

SINGAPORE/MUMBAI (Reuters) – The euro slipped towards the greenback, sterling and Japanese yen on Monday, after Fitch downgraded France’s credit rating late final week, whereas traders turned their focus to a clutch of pivotal central bank coverage selections.

The common currency was a contact decrease at $1.1725, additionally shedding round 0.2% towards sterling and the Japanese yen. The greenback was modestly decrease towards a basket of its friends at 97.5.

Fitch Ratings downgraded France’s sovereign credit rating after hours on Friday, citing the federal government’s rising debt burden. The transfer strips the euro zone’s second-largest financial system of its AA- standing.

The downgrade was largely priced in by the markets upfront, which speaks to the muted response seen within the euro after the announcement, stated Nick Rees, head of macro analysis at Monex Europe.

Analysts have identified that whereas fiscal worries in France may restrict the euro’s beneficial properties within the close to time period, they’re unlikely to spur a significant decline within the currency.

Data reveals that speculative internet long positions on the euro towards the U.S. greenback proceed to carry robust and ticked increased to $18.4 billion as of the week ended September 8, hovering close to a two-year peak.

The euro’s resilience is underpinned by expectations of Federal Reserve coverage easing alongside diminishing prospects for additional European Central Bank fee cuts.

“The widening policy divergence opening up between the ECB and Fed heading into year-end will help to lift EUR/USD towards the 1.2000-level although the pair is currently struggling to break out of the recent trading range between 1.1500 and 1.1800,” analysts at MUFG stated in a word.

Investors are carefully monitoring this week’s key fee selections within the U.S., Japan, United Kingdom, Canada, and Norway, with the Federal Reserve’s choice on Wednesday taking centre stage.

Money markets are totally pricing in a 25 foundation level Fed fee cut, with a 6% probability of an outsized 50 bp discount.

Just as important will likely be Fed members’ “dot plot” projections for charges and steering from Fed Chair Jerome Powell for gauging the extent and tempo of additional easing.

“In order to have an impact on currencies, Powell will have to out-dove the market by giving quite explicit hints about follow-up rate cuts,” stated Carol Kong, a currency strategist at Commonwealth Bank of Australia.

Elsewhere, sterling rose 0.3% to $1.3593, its strongest stage in a month, whereas the greenback slipped 0.1% towards the Japanese yen to 147.47 yen.