The Euro continued to hold close to a 2-year low against the U.S. Dollar following Italy’s credit rating cut by Moody’s late yesterday. Moody’s said that they had cut Italy to Baa2, a rating just barely above junk status, and warned that there was a possibility of further cuts if the government was unable to find private sector funding. Analysts say the timing couldn’t be worse, as later today Italy will auction another €5.25 billion and markets will be anxious to see how well received it is.
As reported at 11:36 a.m. (JST) in Tokyo, the Euro was trading at $1.2206, still close to $1.2166 hit on Thursday on the EBS trading platform. Following the Moody’s announcement, the EUR/USD pair dipped to $1.2181.
The commodity linked Australian Dollar got a reprieve from its recently downtrend after Chinese GDP data showed 7.6% growth in the second quarter as compared to the previous year. While it was the slowest pace in three years, there was some relief felt that the numbers at least came in in line with expectations. The AUD/USD pair was trading at $1.0166, a gain of 0.2% and could be poised for more gains on the back of China growth. The Chinese government is adamant that they will tweak policy as and when needed to ensure that they achieve the soft landing they have been orchestrating.