S&P downgrades US credit rating from AAA to AA+In a highly anticipated move, S&P on Friday – after markets closed – downgraded US credit rating from AAA to AA+.
It is the first time this happens for US after the AAA was awarded to the nation in 1917.
The announcement came after a trading session, which had seen US stocks moving up and down and up again in thin, nervous market conditions.
The effect of the downgrading is likely to cause some nervousness on Monday – but as its was a highly anticipated move – the effects in terms of volatility – should be shortlived.
$EURUSD The immediate impact of S&P’s downgrading of US debt might be more significant for stock markets than for US treasuries. Should stock markets be sold off as a consequence of the downgrading, US investros might go more into US treasuries – hence yield is dropping further. The long term effect of this should be higher borrowing cost for US.
A downgrading of a country is always negative for the country’s currency. As such USD should fall as a consequence of the downgrading. I think this will also be the case in the medium to long term. On the other hand: If stock markets on Monday morning reacts negatively, the immediate effect of this could be a dip for EURUSD. Such a dip should be shortlived though.
Come on Barack Obama, get us out of this mess PLEASE! posted in Forex Conqueror.
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