(EU) Fitch cautioned that unless Euro Zone found new solutions, the break-up risk rises; and that sovereign ratings were under strong downward pressure. A potential Greek EMU exit could lead to AAA sovereign downgrades (Note: Fitch Asia-Pacific chief previously stated that any Greek exit from EMU would probably lead to sovereign downgrades of Italy, Spain, Ireland, Portugal and Cyprus).
(EU) It was reported Cyprus may require a bailout before the end of the month (June 30th is the regulatory deadline to recapitalize Cyprus Popular Bank). The CPB needs €1.8B to fund its shortfall (approx 10% of GDP). In addition, Cyprus also has €2B of sovereign short-term debt maturing next year. It was suggested that an aid request to the EU may be seen this weekend or next.
(US) Fitch: US, France and UK AAA rating under pressure and respective debt ratios must stabilize fairly soon.
How to interpret these headlines?
It is no surprise that the initial optimism following the Spanish Banking Bailout request was quickly offset by the overwhelming concerns over other issues that are still lingering in Europe. With Fitch making its round of comments today, bringing focus back to Greece and the potential of a EMU collapse with Greek exit, market reacted by fleeing to the safety of USD… However, despite of potential sovereign downgrades for France, Italy, Portugal, etc… and a new bailout candidate, Cyprus, market seemed to have taken the news well, keeping EURUSD in a tight range around the 1.25000 level… which confirms my view that perhaps the market has become fatigued over European crisis and is ready for a rebound… OBSERVATION: It is usually the case when the market is ready to turn, you’ll begin to see less and less reaction to negative news, but more and more reaction to positive news… this is described in my Market Psychology article.
Italy, Spain, Ireland, Portugal, Cyprus Sovereign Downgrades On GREXIT
My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.
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