S P lowers credit rating of the UK
The rating agency Standards Poor’s downgraded the credit rating of the UK from “AAA” to “AA” with a negative outlook. This was not a surprise for the market, especially after Moody’s Investors Service on Friday changed the UK’s credit rating to negative. As a rule, lowering the credit rating means higher borrowing costs. Paradoxically, now we are seeing the opposite picture of the market – UK bond yields fell on the results of the referendum: the yield of 2-year bonds fell by 37 basis points to 0.15%, and the yield of 10-year securities collapsed by 44 bp to 0.935%. In the period of instability, investors are trying to get rid of risky assets, preferring to buy bonds, and as bond price is inversely proportional to the yield, the yield of British bonds falls. GBP / USD did not react to lowering the credit rating of Great Britain, as Markets have already played such a scenario. In addition, the “AA” – quite a high rating, considering the current situation. Reaching Monday’s 31-year low, GBP / USD rebounded somewhat in the Asian session and returned to the level of 1.3380 (+ 0.46% per session). Weekly risky conversion (25-delta) on the GBP / USD continued to rise on Monday and reached a level of -3.27% (for comparison: Thursday indicator fell to -14%). But the figure is still below the neutral level, which means that investors do not rule out a further weakening of the pound.
Published yesterday PMI indices from Markit activity did not give a clear picture of the status of the US economy. The June index of activity in the service sector has not met expectations and amounted to 51.3 (forecast: 52), but remained stable in comparison with previous months. The composite PMI rose to 51.2 in May. The index of activity in the manufacturing sector from the Dallas Fed in June improved from -20 to -18.3 (forecast: -15). In general, the last piece of economic data shows that the largest economy in the world tries to accelerate growth. Given the increasing uncertainty associated with “Breksitom” upward pressure on the dollar will not weaken in the near future, since investors massively trying to find a “safe haven” of the European turmoil, it will not help the US economy. In Tokyo on Tuesday, EUR / USD rebounded to 1.1075 (+ 0.30% per session).
“Raw” currency significantly grown over night; NZD, AUD Au NOK added respectively 1.03%, 0.93% and 0.62% based on the USD. Their rise helped steady recovery in oil prices. Futures on crude oil West Texas Intermediate rose by 1.47%, futures for Brent oil rose by 1.25%. Natural gas rose to 0.81%, honey increased by more than 2%. NZD / USD lost all won yesterday the position and returned to the level of 0.7075. If risk appetite continues to grow, strengthening the pair will continue. Near term resistance is at around 0.7159 (the high of June 24).
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