Investing.com - The euro fell to a fresh 16-month low against the U.S. dollar on Friday and an 11-year low against the yen after ratings agency Standard and Poor’s downgraded the sovereign credit ratings of nine euro zone countries, including France.
S&P cut ratings on Italy, Spain, Cyprus and Portugal by two notches and downgraded Malta, Slovakia and Slovenia by one level. Germany kept its triple-A rating.
French Finance Minister Francois Baroin said the loss of the triple-A rating was "not a catastrophe'' and stressed that France still had a solid AA+ rating.
Earlier Friday, a closely watched auction of Italian government debt met with lackluster investor demand, one day after an auction of Spanish government debt met with solid investor demand at sharply lower yields.
Meanwhile, talks aimed at negotiating a restructuring of Greece's debts broke down on Friday, amid disagreements over how much money investors will lose by swapping their bonds, raising fears over a possible default.
German Chancellor Angela Merkel said Saturday that the downgrades demonstrated the importance of the rapid implementation of a pact to reinforce fiscal discipline across the euro zone and added that the region’s permanent bailout facility, the European Stability Mechanism, should be funded soon.
Japanese Prime Minister Yoshihiko Noda said Saturday that the downgrades underlined the importance of shoring up Japan’s public finances and tackling the world’s largest debt load.
The euro strengthened broadly on Thursday after European Central Bank President Mario Draghi said the bank saw signs of stabilization in the region’s economy, adding that the central bank’s recent refinancing operation had made a substantial contribution to improving the funding situation for banks.
The comments came after the ECB left the benchmark interest rate unchanged at 1.0%.
In the U.S., data on Thursday showed that the number of people who filed for unemployment assistance in the U.S. last week unexpectedly rose to 399,000 from 375,000 the previous week.
A separate report showed that U.S. retail sales rose less-than-expected in December.
In the week ahead, investors will be keeping a close eye on developments in the euro zone, amid concerns over the increased risk of sovereign debt contagion, while investors will also be looking ahead to U.S. data on inflation and the housing sector.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, January 16
Japan is to produce government data on core machinery orders, a leading indicator of production. Australia is to release industry data on job advertisements, followed by an official report on home loans, a leading indicator of demand in the housing market.
The U.K. is to publish an industry report by property website Rightmove on house price inflation, a key gauge of the housing industry’s health. Elsewhere, Switzerland is to release a government report on producer price inflation, a key indicator of consumer inflation.
In the euro zone, ECB President Mario Draghi is due to testify before the European Parliament's Economic and Monetary Affairs Committee.
Also Monday, markets in the U.S. are to remain closed for a national holiday.
Tuesday, January 17
The New Zealand Institute of Economic Research is to publish a report on business confidence, a leading indicator of economic health. The country is also to produce industry data on house price inflation. Meanwhile, Japan is to produce data on tertiary industry activity, a key gauge of economic health.
The U.K. is to release a report by Nationwide Building Society on consumer confidence, an important indicator of consumer spending. The country is also to release official data on consumer price inflation, which accounts for a majority of overall inflation, followed by data on retail price inflation.
Bank of England Governor Mervyn King is also due to testify on the Financial Stability Report before the Treasury Committee, later in the day.
The euro zone is to produce a report on the German ZEW economic sentiment index, a leading indicator of economic health, as well as reports on consumer price inflation and the ZEW index of economic sentiment in the single currency area.
Canada is to publish official data on foreign securities purchases. The Bank of Canada is to announce its benchmark interest rate.
Meanwhile, the U.S. is to publish the Empire State Manufacturing index, an important gauge of economic health.
Wednesday, January 18
Australia is to release an industry report on consumer sentiment, followed by official data on new motor vehicle sales, an important sign of consumer confidence.
In the U.K., official data is to be produced on claimant count change, the first indication of the employment situation. The country is also to publish an official report on the employment rate, a key signal of overall economic health. Elsewhere in Europe, Switzerland is to produce a report on the ZEW economic expectations index, a leading indicator of economic health.
The U.S. is to release government data on producer price inflation, followed by data on net foreign purchases of long-term securities, which is the balance of domestic and foreign investment. The Federal Reserve is also to produce its capacity utilization rate, a key gauge of consumer inflation, as well as data on industrial production. The country is also to publish official data on crude oil inventories.
Meanwhile, the Bank of Canada is to release its monetary policy report, followed by a press conference.
Thursday, January 19
New Zealand is to release official data on consumer price inflation, while Australia is to publish a report by the Melbourne Institute on inflation expectations. The country is also to release official data on employment change, a key indicator of consumer spending, and the employment rate.
In the euro zone, the ECB is to produce a report on the current account, followed by the central bank’s monthly bulletin.
Elsewhere, Canada is to release official data on manufacturing sales, an important gauge of economic health.
The U.S. is to publish government data on building reports, an excellent gauge of future construction activity, as well as a government report on consumer price inflation. Later in the day, the U.S. Department of Labor is to release data on unemployment claims, followed by official data on housing starts and a separate report on manufacturing activity in the Philadelphia area.
Friday, January 20
Australia is to release official data on import prices.
The euro zone is to produce data on German producer price inflation. Elsewhere in Europe, the U.K. is to publish an official report on retail sales, the primary gauge of consumer spending.
Later in the day, Canada is to release official data on consumer price inflation, as well as wholesale sales, a leading indicator of consumer spending.
The U.S. is to round up the week with a report by the National Association of Realtors on existing home sales, an important gauge of economic health.
S&P cut ratings on Italy, Spain, Cyprus and Portugal by two notches and downgraded Malta, Slovakia and Slovenia by one level. Germany kept its triple-A rating.
French Finance Minister Francois Baroin said the loss of the triple-A rating was "not a catastrophe'' and stressed that France still had a solid AA+ rating.
Earlier Friday, a closely watched auction of Italian government debt met with lackluster investor demand, one day after an auction of Spanish government debt met with solid investor demand at sharply lower yields.
Meanwhile, talks aimed at negotiating a restructuring of Greece's debts broke down on Friday, amid disagreements over how much money investors will lose by swapping their bonds, raising fears over a possible default.
German Chancellor Angela Merkel said Saturday that the downgrades demonstrated the importance of the rapid implementation of a pact to reinforce fiscal discipline across the euro zone and added that the region’s permanent bailout facility, the European Stability Mechanism, should be funded soon.
Japanese Prime Minister Yoshihiko Noda said Saturday that the downgrades underlined the importance of shoring up Japan’s public finances and tackling the world’s largest debt load.
The euro strengthened broadly on Thursday after European Central Bank President Mario Draghi said the bank saw signs of stabilization in the region’s economy, adding that the central bank’s recent refinancing operation had made a substantial contribution to improving the funding situation for banks.
The comments came after the ECB left the benchmark interest rate unchanged at 1.0%.
In the U.S., data on Thursday showed that the number of people who filed for unemployment assistance in the U.S. last week unexpectedly rose to 399,000 from 375,000 the previous week.
A separate report showed that U.S. retail sales rose less-than-expected in December.
In the week ahead, investors will be keeping a close eye on developments in the euro zone, amid concerns over the increased risk of sovereign debt contagion, while investors will also be looking ahead to U.S. data on inflation and the housing sector.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, January 16
Japan is to produce government data on core machinery orders, a leading indicator of production. Australia is to release industry data on job advertisements, followed by an official report on home loans, a leading indicator of demand in the housing market.
The U.K. is to publish an industry report by property website Rightmove on house price inflation, a key gauge of the housing industry’s health. Elsewhere, Switzerland is to release a government report on producer price inflation, a key indicator of consumer inflation.
In the euro zone, ECB President Mario Draghi is due to testify before the European Parliament's Economic and Monetary Affairs Committee.
Also Monday, markets in the U.S. are to remain closed for a national holiday.
Tuesday, January 17
The New Zealand Institute of Economic Research is to publish a report on business confidence, a leading indicator of economic health. The country is also to produce industry data on house price inflation. Meanwhile, Japan is to produce data on tertiary industry activity, a key gauge of economic health.
The U.K. is to release a report by Nationwide Building Society on consumer confidence, an important indicator of consumer spending. The country is also to release official data on consumer price inflation, which accounts for a majority of overall inflation, followed by data on retail price inflation.
Bank of England Governor Mervyn King is also due to testify on the Financial Stability Report before the Treasury Committee, later in the day.
The euro zone is to produce a report on the German ZEW economic sentiment index, a leading indicator of economic health, as well as reports on consumer price inflation and the ZEW index of economic sentiment in the single currency area.
Canada is to publish official data on foreign securities purchases. The Bank of Canada is to announce its benchmark interest rate.
Meanwhile, the U.S. is to publish the Empire State Manufacturing index, an important gauge of economic health.
Wednesday, January 18
Australia is to release an industry report on consumer sentiment, followed by official data on new motor vehicle sales, an important sign of consumer confidence.
In the U.K., official data is to be produced on claimant count change, the first indication of the employment situation. The country is also to publish an official report on the employment rate, a key signal of overall economic health. Elsewhere in Europe, Switzerland is to produce a report on the ZEW economic expectations index, a leading indicator of economic health.
The U.S. is to release government data on producer price inflation, followed by data on net foreign purchases of long-term securities, which is the balance of domestic and foreign investment. The Federal Reserve is also to produce its capacity utilization rate, a key gauge of consumer inflation, as well as data on industrial production. The country is also to publish official data on crude oil inventories.
Meanwhile, the Bank of Canada is to release its monetary policy report, followed by a press conference.
Thursday, January 19
New Zealand is to release official data on consumer price inflation, while Australia is to publish a report by the Melbourne Institute on inflation expectations. The country is also to release official data on employment change, a key indicator of consumer spending, and the employment rate.
In the euro zone, the ECB is to produce a report on the current account, followed by the central bank’s monthly bulletin.
Elsewhere, Canada is to release official data on manufacturing sales, an important gauge of economic health.
The U.S. is to publish government data on building reports, an excellent gauge of future construction activity, as well as a government report on consumer price inflation. Later in the day, the U.S. Department of Labor is to release data on unemployment claims, followed by official data on housing starts and a separate report on manufacturing activity in the Philadelphia area.
Friday, January 20
Australia is to release official data on import prices.
The euro zone is to produce data on German producer price inflation. Elsewhere in Europe, the U.K. is to publish an official report on retail sales, the primary gauge of consumer spending.
Later in the day, Canada is to release official data on consumer price inflation, as well as wholesale sales, a leading indicator of consumer spending.
The U.S. is to round up the week with a report by the National Association of Realtors on existing home sales, an important gauge of economic health.