EUR/GBP: Moody’s Maintains Spain’s Credit Rating, Boosting Appetite for Risk

Yesterday’s economic report indicated that confidence among German investors improved for a second month in October, after the European Central Bank announced its new bond-buying program to help lower bond yields of troubled countries. According to a ZEW economic release, the 6-month economic outlook for Germany improved to -11.5 points this month, from -18.2 points in September. In the UK, inflation cooled down to 2.2 percent in September, giving more room for the Bank of England to expand monetary stimulus. As a result, the Euro won versus the Pound. In today’s European trading session, the EUR/GBP pair is expected to rise as markets turn to the single currency due to recent positive developments in the bloc.

Moody’s Investors Service’s move to maintain the credit rating of Spain brought relief to the markets, following the bank stress tests and the credit rating downgrade by Standard & Poor’s. The ratings agency cited the ECB’s willingness to buy the nation’s government bonds that reduced the risk of the country being blocked from the markets. Adding to the positive sentiment is also the recent decline in Spanish borrowing costs amidst speculations that the country is moving closer to requesting for a bailout from the Euro area’s rescue fund. According to reports, a senior official of the Spanish Finance Ministry said that the country is considering a request for a credit line from the European Stability Mechanism, a requirement before the ECB proceeds with its bond purchasing. Talks of a possible Spanish bailout are seen to buoy the single currency in today’s trades.

In the UK, data on the number of people claiming unemployment-related benefits is expected to show a drop by 2,000 in October, following its biggest fall in two years in August by 15,000. However, the unemployment rate is still expected to remain at 8.1 percent. With better Euro Zone news, the EUR/GBP pair is likely to rise in today’s European exchanges, making buy a better position to take.

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