EURUSD Tanks After Egan Jones Downgrades Spain... Again

[WallyWeaver]

EURUSD Tanks After Egan Jones Downgrades Spain…Again

By Christopher Vecchio, Currency Analyst

29 May 2012 16:20 GMT

The EURUSD was trading higher into the European session close today until rating agency Egan Jones announced that it would downgrade the Euro-zone’s fourth largest economy, Spain. The move to drop the country’s berated rating to ‘B’ from ‘BB-‘ comes only a week after the same agency downgraded Spain from ‘BB+’ to ‘BB-.’ The news is not surprising, however, considering recent economic and financial developments in Spain.

As the decision stated, “Spain will inevitably be faced with sizable payments to support its banking sector and for its weaker provinces.” Egan Jones supports this view by pointing out that the Spanish economy has been hobbled by the government deficit, which sits at 8.9 percent, and the country’s worsening labor market, whose unemployment rate sits just below 25 percent. The downgrade notice also notes that “Spain is short about €50 billion per year for social payments, €20 billion per year for interest, and an additional €30 billion for asset growth; hence the €100 billion per annum increase in debt.” Accordingly, Spain’s rating holds its negative outlook.

EURUSD 1-minute Chart: May 29, 2012

Charts Created using Marketscope – Prepared by Christopher Vecchio

The Euro was under pressure across the board on the news, as were other risk-correlated assets, with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) surging back to fresh session highs at 10212.08. The EURUSD dropped from just under 1.2550 to as low as 1.2460, a fresh 2012 low, before rebounding to 1.2469, at the time this report was written.

Link:

http://www.dailyfx.com/forex/market_alert/2012/05/29/EURUSD_Tanks_After_Egan_Jones_Downgrades_Spain_Again.html

[WallyWeaver]

Thanks WW for bringing this over.

Normally markets have waves (up and down) but this one seems to be just one big black hole! I would be a hypocrite to say that I am angry at what is going on over there as I am profiting from the situation, BUT, it is unfortunate that so many must suffer because of the greed of a few.

It is unfortunate at what is happening in the overall picture... well said 20.

But, I suppose, that's because we are looking at the results and how people are effected at this juncture, and it is sad to see the suffering this will all bring about, no question.

Another way to look at it, though, is as a teachable moment. What is happening across the pond is where we are headed in a few years. What is happening in Europe, in my opinion (banksters and banking policies excluded), is the only possible outcome of socialistic governments that have grown too big and are too expensive to operate any longer.

In the words of Margaret Thatcher:"The trouble with socialism is that sooner or later you run out of other peoples' money." This is the reality Europe is faced with today.... there simply isn't enough money for them to operate as they have in the past any longer. And to make matters worse, they are unwilling to cut their spending or the size of their governments because it's all they know. They grew up that way and it's almost impossible for them to comprehend any other way of doing things.

So, as harsh as it sounds, it's simply a matter of "you reap what you sow." Europe has spread the seeds of big, socialistic government for generations and now the harvest is here. Not to mention Spain took a HUGE gamble on unproven green energy policies and that has also bit them in the rear in a big way.

So, continue to profit friend, and pray that we are smart enough to learn from Europes mistakes rather than follow down the path they have forged.

WW.