After S&P, Moody's warned that it may downgrade Greece's credit rating in a few months. This raised market concerns that the country's economic and political conditions would paralyze it measures to reduce budget deficits.
In an interview in Tokyo today, Pierre Cailleteau said that if there are significant deviations from the plan, Moody's will even downgrade Greece's rating by a couple of notches. Currently, Moody's rating of Greece is A2, the 6th highest and 2 notches above the BBB+ held by S&P and Fitch Ratings. If Moody's reduce Greece's credit rating to the same level as the other 2 agencies, it will intensify the problem of the sovereign crisis as the ECB is going to revert to old collateral rule which requires ECB collateral to be at least A-.
Currently trading at 1.349 against USD, euro's near-term remain weak. Against Japanese yen, the euro even slurped to 120.2, the lowest level in a year, as investors shift capitals from risky assets to safe havens.
Commodities also weaken with WTI crude oil price slides to 79.5, paring the gains made yesterday. Heating oil and gasoline also lose grounds, moving to 2.2.034 and 2.08 from 2.05 and 2.1, respectively.
Gold weakens further. Apart from being pressured by the Fed's low rate policy and low inflation outlook, a US Treasury 7-year auction may have impact on the yellow metal's movement. Previous Treasury auctions received good response due to heightened sovereign risks. Funds flowing into US assets should lift the dollar, hence, weighing on gold.
Concerning economic data, the Eurozone economic confidence surprisingly dropped to 95.9 in February while January's reading was revised up to 96.
Later in NY session, durable goods orders probably rose +1.4% m/m in January following a +0.3% increase in the prior month. Excluding transportation, the reading is expected to be narrowed +1.1%. Initial jobless claims should have slipped to 465K in the week ended February 20 from 473K. Although the report included the President's Day holiday which usually leads to higher claims, large reading in the previous month may cause a reversal in the next week.