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The euro halted three days of gains versus the dollar as Moody’s Investors Service downgraded Portugal’s credit rating, reviving concern about Europe’s ability to solve its debt crisis.
The 17-nation common currency depreciated versus all but two its major counterparts after Portugal was cut two steps by Moody’s yesterday to A3, four steps from so-called junk status. The rating company said its outlook remained negative given Portugal’s “subdued growth prospects” and risks that the government won’t be able to implement deficit-reduction plans.
Portugal “faces significant challenges, not least a less supportive economic environment,” Moody’s said in a statement late yesterday. The country’s gross domestic product is expected to “decline this year and experience a weak recovery at best in 2012,” Moody’s said.
“The euro’s under pressure after Portugal’s downgrade,” said Jane Foley, a senior strategist at Rabobank International in London. “Momentum for euro buying has waned.”
Technical analysis suggests the euro’s outlook has worsened after its failure to sustain gains past $1.4000.
US data starts at 1100GMT with the weekly MBA Mortgage Application Index. Meanwhile, US data at 1230GMT includes Housing Starts, Building Permits, the Q4 Current Account and PPI. The pace of housing starts is expected to slow to 560,000 annual rate in February after improving to a 596,000 annual rate in January. Builders continue to hold the line on
new home supply. NAHB reported no change in the builders index in February. Producer prices are expected to increase by 0.7% in February after a 0.8% increase in January. Core prices are expected to increase by 0.2% after the surprise 0.5% jump in January. Later US data sees the weekly EIA Crude Oil Stocks data at 1430GMT.
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