Moody’s Downgrades Banks

Currencies Direct June 22nd 2012 - < 1 minute read

In a widely expected move, fifteen global
banks were downgraded by the ratings agency Moody’s yesterday evening. British
banks Barclays, HSBC and RBS saw their credit rating cut by two notches and one
notch respectively.  All are likely to respond with reports today
defending their credit worthiness in light of the announcement by Moody’s,
undoubtedly citing that the reports are backward looking and do not fully
reflect current market conditions. They will have a point as well. The markets
have opened in risk-off mode responding to the downgrades, with equity markets
down and the USD regaining ground against Sterling and the Euro.

With the crucial EU summit due at the end of
the month and today’s meeting between Germany, France, Italy and Spain also
critical, the IMF
has used this week to lay out its blueprint of how to save the Euro-zone. Much
to Germany’s ire, the IMF is pushing for common debt, a European wide deposit
guarantee scheme & most crucially in the current climate sovereign bond
purchases by the ECB. Angela Merkel will fight to oppose almost all the
measures, but it is getting to the point where only firm and decisive action to
place the Euro-zone on a path towards the IMF reforms is enough to stop the
crisis from finally getting to big for politicians to act.

Around the markets today the key data release
is the IFO business climate survey which is likely to follow the economic
survey from earlier in the week by registering a steep decline.

Have a great weekend.

Report by Alistair Cotton

Written by
Currencies Direct

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