French Credit Rating Downgrade Has Little Impact on EUR/USD

Support: +44 (0) 203 301 0483 | support@financialspreads.com
Financial Spreads: Spread Betting and CFD Trading
French Credit Rating Downgrade Has Little Impact on EUR/USD

French Credit Rating Downgrade Has Little Impact on EUR/USD



The spotlight has moved back onto France today as Moody's downgraded their credit rating from AAA to AA1.

This puts it in line with S&P but comes ahead of any potential move by Fitch, who will no doubt follow suit in the coming months.

This downgrade has been on the cards for some time and, since Francois Hollande has made little effort to address the country's fiscal problems, the markets had been expecting it.

We did see some initial weakness from the euro in the aftermath of Moody's overnight announcement and the FTSE did fall at the open this morning. However, France's borrowing costs have barely budged an inch and the indices have already bounced from their lows, whilst the EUR/USD pair is back above the $1.2800 level.

As a result, it seems that investors have already shrugged this downgrade off, but it serves as a reminder that France remains in a perilous situation.

Many believe that France is an accident waiting to happen, as its debt trajectory is going in completely the wrong direction.

Whilst France's deficit might be lower than the UK's, it's total debt as a percentage of GDP is one of the worst in the EU; higher than the UK's and even higher than Spain's.

The country's lack of competitiveness is slowly but surely dragging it down and so there's every chance that President Hollande will back-track on some of his policies next year.


Also see:


By Simon Denham, 20 November 2012


Contact Customer Support

+44 (0) 203 301 0483
support@financialspreads.com

Also see:
73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Spread betting & CFDs trading are complex instruments & come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading these products with this provider. You should consider whether you understand how these products work & whether you can afford to take the high risk of losing your money. Click here to see the risk warning notice.