Following the dramatic downgrade of US’s credit rating at the beginning of August, now Italy’s turn came up: Standard and Poor’s, one of the most important rating agency worldwide, announced yesterday, September 19th, that it downgraded Italy’s credit rating from +A to A on foreign and local long term debt with a negative outlook.
The foreign and local short term debt declined to A-1.
This news didn’t surprise much the financial community as it had expected such a downgrade for Italy’s credit rating. In the past couple of months Italy’s five year credit default swap – this could serve as an indicator for the market’s expectations of a potential default on Italy’s debt – sharply inclined and reached as of yesterday 488.40 basis points. This rate is among the highest in the European Union and the only countries in the Euro zone with higher rates are Greece, Portugal and Ireland.
The downgrade decision was based on S&P’s view of “the Italian economy’s weakening growth prospects“, Italy’s “significant political impediments to growth-enhancing reforms” and their view of “Italy’s fragile governing coalition and policy differences within parliament“.
This news could stir up throughout the day the financial markets and further weaken the Euro against major currencies including the USD and consequently may also weaken major commodities prices including gold and crude oil prices.
Euros to US dollar exchange rate is currently traded down at 1.3635 a 0.3734% decrease as of 08:14*.
Current gold price, short term futures (October 2011 delivery) is traded at $1,788.0 per t oz. a $9.1 increase as of 08:01*.
Current Nymex crude oil price, short term futures (October 2011 delivery) is traded down by 0.18% to $85.55 per barrel as of 08:00*.
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