FOREX-Euro declines; S&P warning weighs ahead of EU summit

The following is an excerpt from an article in Reuters that quotes Finance Professor Jeff Bergstrand on Standard & Poor’s euro zone downgrade warning. To read the entire article visit: S&P warning weighs ahead of EU summit

The euro slipped against the dollar for the third straight day on Tuesday, surrendering earlier gains, as investors remained focused on Standard & Poor’s euro zone downgrade warning.

Rating agency S&P on Monday placed its long-term sovereign ratings on 15 euro zone countries on CreditWatch negative, which normally means a chance of downgrade within three months.

The warning, which included top-rated Germany and France, came as the two countries announced an initiative, to be discussed at a Friday summit, to impose budget discipline across the euro zone through treaty changes.

Analysts said the warning has put European Union leaders under additional pressure to produce quick results to stabilize markets and regain confidence. If core euro zone nations are downgraded, the European rescue fund will find it tough to attract investor interest in its bond offerings, they said.

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