Forexpros – The euro erased losses against the pound on Tuesday, but the single currency remained vulnerable after ratings agency Standard & Poor’s warned that it may carry out a mass credit downgrade of euro zone members.
EUR/GBP pulled back from 0.8538, the pair’s lowest since November 30, to hit 0.8574 during European late morning trade, easing up 0.12%.
The pair was likely to find support at 0.8532, the low of November 30 and resistance at 0.8617, the high of December 2 and a one-week high.
The euro found support after German Chancellor Angela Merkel said European Union leaders will take important decisions to stabilize the euro zone at a summit later this week and brushed off S&P’s warning of a possible joint downgrade of euro zone nations.
“What a rating agency does is the responsibility of the ratings agency,” Merkel said.
“We will take decisions on Thursday and Friday that we consider important and indispensable, and with that make a contribution to the stabilization of the euro zone,” she added, warning that this would be a lengthy process.
The comments came after S&P put the long-term sovereign-debt ratings of 15 euro zone members, including Germany, Italy and Spain on negative watch and flagged a potential two-notch downgrade for France.
This means that there is a 50% chance of a downgrade within 90 days but the firm said it plans to announce any ratings changes “as soon as possible” after Friday’s summit.
On Monday, Merkel and French President Nicolas Sarkozy outlined proposed reforms to EU treaties to strictly enforce budget discipline and restore investor confidence in the single currency zone, which will be discussed at the summit.
The euro also erased losses against the U.S. dollar, with EUR/USD inching up 0.06% to hit 1.3411.
Meanwhile, in the U.K. a report by the British Retail Consortium showed that retail sales posted the largest annual drop in like-for-like sales since May last month, as widespread discounts failed to lure in shoppers.
British Mortgage lender Halifax also reported a 0.9% monthly fall in U.K. house prices in November, worse than the 0.1% dip expected by economists, although it said it expected the housing market to hold steady in the coming months.
Forexpros
