Forex Pros – The euro slid to a six-day low against the pound on Wednesday, weighed by fears over sovereign debt contagion in the euro zone after ratings agency Moody’s downgraded Portugal’s credit rating to junk status.
EUR/GBP hit 0.8956 during European late morning trade, the pair’s lowest since June 28; the pair subsequently consolidated at 0.8958, shedding 0.30%.
The pair was likely to find short-term support at 0.8927, the low of June 28 and resistance at 0.9048, Tuesday’s high.
On Tuesday, ratings agency Moody’s downgraded Portugal’s credit rating by four notches to Ba2, warning that there was a “growing risk” that Portugal may need a second round of rescue funds before it can return to capital markets.
Following the downgrade, the cost of insuring Portuguese government debt against default jumped, to hover just below a record high.
Sentiment on the single currency was also hit by reports that banks have sold off a substantial proportion of their Greek government-bond holdings despite pledges not to do so, undermining expectations that private bondholders would contribute to a bailout for Greece.
The euro was also lower against the U.S. dollar, with EUR/USD shedding 0.54% to hit 1.4350.
Also Wednesday, official data showed that German factory orders rose unexpectedly in May, increasing for the second consecutive month.
A separate report showed that the euro zone’s economy grew in line with preliminary estimates in the first quarter of 2011, expanding 0.8%.
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