Germany’s sovereign debt was downgraded by ratings agency Egan Jones by one notch to A+ from AA- with a negative outlook. Consumers will be keen to see if some of the other major credit rating agencies will follow suit if this is the case, this could further weaken the Euro.
German Chancellor Angela Merkel has made clear that she will be resisting calls for shared bonds saying that shared liability for sovereign debt in Europe is not being contemplated during her lifetime. The possibility of Euro bonds is unlikely without the backing of the European powerhouse.
The USD could gain grounds as US consumer confidence declines from 64.4 down to a revised figure of 62 in June, which was lower than consensus predictions of 63.5.
Bank of England (BoE) Governor Sir Mervyn King has looked at the possibility of a further interest rate cut below 0.5% as inflation has dropped the most in recent months. However the cost of reducing interest rates could be more detrimental than the rewards to the consumer as fewer banks would be able to offer interest on deposits. To help businesses and consumers George Osborne has made yet another U-turn by delaying the 3p fuel tax rise till next year. The news was welcomed by business and Tory backbenchers.
Safe haven currencies such as the Japanese Yen and US dollar gained against the Euro as Italian and Spanish borrowing costs rose on fears that the upcoming European summit will fail to solve the sovereign debt crisis.
As the summit approaches in the next 24 hours in Brussels the Eurozone will be waiting eagerly for some good news otherwise as certain reports highlight today the Euro is expected to deteriorate further against its counterparts USD and GBP.
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