Moody's downgrades credit ratings of 28 Spanish banks on Sovereign Risk!

Moody's cut long-term debt and deposit ratings on 28 Spanish banks by one to four notches, saying the weakening finances of Spain's government is making it more difficult for the country to support its lenders.

Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s largest lenders, were downgraded by Moody’s and at least a dozen lenders were lowered to junk status. Moody’s downgraded six banks by four levels and 10 by three grades with the rest getting one and two tier declines.

All eyes will be on Thursday and Friday in Brussels for another summit aimed at reining in Europe's debt crisis working towards a plan, by which the Eurozone countries breaching debt and deficit rules would have to cede sovereignty on national budgets.

Meanwhile, Cyprus has told the European authorities that it intends to apply for financial assistance, the fifth Eurozone member to do so.  Cyprus is heavily exposed to the Greek economy and needs help to shore up its banks.

United Kingdom’s Inflation expectations over the coming year fell this month to 2.4%, the lowest analysis since April 2010. Furthermore, inflation expectations for the next five to ten years dropped to 3.2% in June from 3.4% in May. This latest figure matched January's level, which was the lowest since May 2010.

United States New home sales reach two year high as U.S. rates fall. Demand for new U.S. homes rose more than forecast in May as mortgage rates dropped. Purchases increased to a 369,000 annual rate, the most since April 2010 and up 7.6% from the prior month. Therefore the number of houses on the market held near a record low.

In conclusion, the negative news from Europe seems to be having little effect on EUR/USD, however the Pound is faring better against both the US Dollar and the Euro this morning. This further signifies that the UK is gaining a safe haven status!

For a live exchange rate login to RationalFX now, or call +44 (0)20 7220 8181