European Summary - Pound and Euro Slide vs Dollar

The Dollar was firmer against its major European rivals in overnight trading. The main reason for the risk aversion were downbeat comments from rating agencies on Europe and the UK, and a dissipation of the rally started from last Friday’s non-farm payroll report. In Tuesday’s overnight trading stocks were lower and commodities fell as well.

The Pound was weakers as Moody’s warned that UK banks could suffer further downgrades once the UK government withdraws its support and Fitch said the UK sovereign credit profile has deteriorated. Those sentiments pushed the GBP/USD pair down about 100 pips to $1.4939. Data from overnight showed a positive retail sales report from the BRC, but it was swamped by a negative RICS house price balance report and a widening of the trade deficit.

While the Euro gained on the Pound in overnight trading, it too was weaker against the Dollar with the EUR/USD pair retracing its steps from tis rally on Friday to retest the 1.3535 area. Fitch said that Portugal may need a downgrade, and that it should not be assumed that Greece would be successful in implementing its budget and that there is a possibility of a sovereign default in the Euro-zone.

The USD/JPY meanwhile fell in favor of the Yen as it benefited from repatriation flows. That pair retraced some of its sharp move from Friday, testing the 89.60 area prio to NY trading.

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