The euro fell today as Standard & Poor’s downgraded Spain’s sovereign credit rating, adding to speculations that the debt crisis is spreading across Europe despite measures taken by European governments.
It is no surprise that the rating agency lowered Spain’s grade as nation’s unemployment surged to the highest level in 18 years — a clear signs of problems in the country’s economy. S&P cited reasons for its decision:
We believe that the Kingdom of Spain’s budget trajectory will likely deteriorate against a background of economic contraction in contrast with our previous projections.
At the same time, we see an increasing likelihood that Spain’s government will need to provide further fiscal support to the banking sector.
Many analysts believe that Spain will follow Greece in requesting a bailout.
EUR/USD fell from 1.3223 to 1.3184 and EUR/JPY dropped from 107.08 to 106.21 as of 8:23 GMT today.
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