Standard & Poors just lowered its rating on Ireland (Source: Dow Jones):
Standard & Poor’s Ratings Services trimmed its rating on Ireland, saying the projected fiscal cost to the Irish government of supporting the hard-hit financial sector has increased significantly above prior estimates.
Ireland’s banks were stung by the property-market crash. They made big loans to property developers, many of which are unlikely to be repaid, forcing the Irish government to pump billions of euros into the banks.
As a result of those woes, S&P analyst Trevor Cullinan said the rising budgetary cost of supporting the Irish financial will “further weaken the government’s fiscal flexibility over the medium term.”
The rating was lowered by a notch to AA-, which is three notches under AAA. The ratings outlook is negative, reflecting S&P’s view that a further downgrade is possible if the fiscal cost of supporting the banks rises further, or if other adverse economic developments weaken the government’s ability to meet its medium-term fiscal objectives.
Read the full article at WSJ.com.
The Euro – which had already resumed its downtrend earlier this month – took another nice kick in the teeth after this hit the wires. In the broader picture, though, it looks like Mr. Market already had this priced in. He’s not stupid, after all!
The Euro had a nice “dead cat” bounce from June until August. Now, it looks like it’s destined for parity with the US dollar. (Source: StockCharts.com)
Is it time to short the Euro again? I think so. Much of the prevailing bearish sentiment was worked off during that last rally – setting the stage nicely for another leg lower.
More details on a new Euro short – and an update on that S&P short position – later this evening!
Hat tip Carson for the heads up about this via Google Chat!
More Euro reading:
- A closer look at sovereign debt levels in Europe (and Japan and the US, too)
- And on May 5th, we wondered if the Euro was due for a pop – because everyone hated it
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