The euro fell below 1.26 against the dollar for the first time since early December yesterday, after Moody’s said it may cut the ratings of several banks with units in Eastern Europe, adding to concerns that financial turmoil may deepen. Eastern European banks, which are mainly subsidiaries of financial institutions based in Austria, Italy, France, Belgium, Germany and Sweden, are likely to come under “downward pressure” that may weaken their parent companies. It is therefore likely sentiment on the euro will become increasingly bearish as the financial downturn deepens.
The dollar also gained support as stock markets fell yesterday, which made the US currency more attractive as a safe haven.
Construction Output data is released in the eurozone this morning, while MBA Mortgage Applications, Housing Permits, Import Price Index and Industrial Production figures are released in the US this afternoon, in addition to the minutes from the recent Federal Open Market Committee Meeting.
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