The euro-party that followed the Non-Farm Payrolls is over. Fitch downgraded both Italy and Spain in the final note for this week.
The result: 100 pips are lost in EUR/USD, which is very close to last week’s close.
The downgrade of Italy came after S&P downgraded the euro-zone’s third largest economy earlier in the week. Contrary to S&P, Fitch only took away one notch and its warning wasn’t of a “multi-level†downgrade in the future.
The downgrade of Spain was somewhat less expected. Europe’s fourth largest country took some significant steps, including a constitution change, in order to tackle debt. But outside of the central government, the regions’ performance has been somewhat less shiny.
In any case, the timing of both downgrades triggered profit taking after the NFP rally. The gain of 103K jobs in the US triggered a nice risk rally. EUR/USD, which was already above 1.35, fell to 1.3380 before stabilizing above 1.34.
A close above 1.3360, which was last week’s close, will still leave some kind of good taste in a week where we finally saw the euro-zone tackle the issue of the banks. The emergency at Dexia finally pushed Europeans to act.
