Moody's cuts France's AAA rating to AA1

The second largest eurozone economy took a setback yesterday as it lost its top credit rating. Moody's Investor Services cut France's credit rating from AAA to AA1 and maintained the negative outlook, citing an uncertain fiscal position and a deteriorating economy. This downgrade will put increasing pressure on President Francois Hollande to find ways to bolster economic growth.

A group of European finance officials met yesterday to try to formulate plans for the next Greek bailout payment. Finance officials from France, Germany, Italy and Spain convened a day ahead of the main meeting in Brussels to discuss solutions to the €15bn Greek funding gap. The lengthening of maturities on Greek debt and lowering interest rates on the bailout loans are the main options being considered as ways to re-engineer assistance to Greece without injecting more funds.

On the FX market, much of the attention this week will be on the release of the most recent BoE monetary policy meeting minutes. While the Quarterly Inflation report revealed the reasoning for the pause, markets will be eager to find out the actual vote split, especially since the move by the BoE to transfer APF interest to the Treasury said to have influenced some policy makers. The pair will also remain a by-product of the general investor sentiment surrounding the never-ending Greek debt related commentary by various officials from the Eurozone. GBPEUR is currently trading at a range of 1.2425 – 1.2449.

Source: The Institute of Export