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Forex - EUR/GBP turns lower amid French downgrade speculation

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Forex Pros - The euro turned lower against the pound on Wednesday, pulling back from a one-month high amid speculation France's sovereign debt rating could be downgraded, adding to fears over the region's debt crisis.

EUR/GBP pulled back from 0.8885, the highest since July 11, to hit 0.8785 during U.S. morning trade, down 0.23% on the day.

The pair was likely to find support at 0.8675, Tuesday's low and short-term resistance at 0.8885, the daily high.

French President Nicolas Sarkozy met with Bank of France Governor Christian Noyer earlier in the day, as well as with a number of government ministers to discuss the country's economic and financial situation.

The meeting comes amid mounting concerns that France's top-tier AAA credit rating could be downgraded if the euro zone sovereign debt crisis worsened.

Adding to concerns, shares in French lenders Societe Generale, BNP Paribas and Credit Agricole plunged 14%, 9% and 8.3% respectively on the CAC 40 index.

Meanwhile, the Bank of England said in its quarterly inflation report earlier that it expected inflation to ease towards its 2% annual target by the end of 2012 and dip slightly below target in 2013.

The BoE added that economic growth was likely to remain "sluggish" in the near term, prompting the central bank to cut its year-end growth forecast to just below 2.0% from to 2.5% at the time of its May inflation report.

BoE Governor Mervyn King said that, "Mood in markets has taken a turn for the worse" and that, "There is rising concern about euro-area debt."

The euro was also lower against the U.S. dollar, with EUR/USD dropping 0.96% to hit 1.4236.

Later in the day, the U.S. was to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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