By FX Empire.com

After S&P decision to cut Spain’s credit rating by one level to AA- from AA, and Fitch downgraded three European banks UBS AG, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc and placed a number of other banks on watch for possible downgrades, losses were seen the financial markets this morning.

Demand on safe haven was induced by worries from rising defaults that could hurt the efforts to contain the European debt crisis. Thereby The MSCI Asia Pacific Index fell by 0.9% at 12:23 inTokyo, where Nikkei 225 was down 0.85% while Hang Seng was down 1.36%.

However news that Slovakia approved Europe’s bailout plan, giving leaders the green light to start implementing the policies needed to prevent contagion, while the G20 finance chiefs and central bank heads will meet in Paris today, with rumors they might expand the IMF lending resources to help contain the debt crisis, markets rebounded.

Gains were seen across the European equities, as well as the currency and commodity markets, especially since retail sales and confidence is expected to improve in theUS, according to reports set for release later in the day. The FTSE 100 rose as of this writing 1.07%, DAX rose 1.20% and CAC 40 rose 1.02%.

The euro is gaining as of this writing trading around 1.3800 since the CPI report from Europe showed no surprises, with an outcome of 3.0% as expected in September matching the previous reading as well. The pound is also moving with some positive momentum around the 1.5775 while UK lack the fundamentals today.

As optimism started dominating the markets, demand on the safe haven dollar started to fall, so the dollar index is trading as of this writing around the 76.90 level, while the yen weekend to trade around the 77.00 level. The CHF however is almost unchanged trading around 0.8970 awaiting for more confirmation.

This move gave an upside push to the commodities, where gold is trading with positive momentum around the $1675.60 per ounce level, while oil broke the $85.00 level trading around $85.40 per barrel level. The AUD was also stringer today, trading around 1.0244 as of this writing.

Read more Forex Market Analysis here!