Euro posts small gains against US dollar in light trade

The euro strengthened by 0.17 cents (0.12%) against the US dollar yesterday, finishing the day at $1.4013.

• In a quiet day’s trading because of the American public holiday, the euro strengthened slightly against the greenback as risk appetite in the market continued.
  
• In early trading on Friday, the single currency strengthened against the dollar after investors speculated that the US’s sovereign rating could be downgraded by ratings agencies. Standard and Poor’s decision on Thursday to cut its UK outlook from “stable” to “negative” led many to question which other major nations were susceptible to downgrades.
  
• Although another agency, Moody’s, said it was happy with the US’s ratings at the moment, investors still speculated that it could suffer a downgrade because of its government’s high levels of borrowing. This sent the euro into positive territory against the dollar as investors sold off US assets.
  
• In trading so far today, the euro has weakened against the dollar following news that German regulator BaFin had warned that toxic debt of the country’s banks would explode “like a grenade” unless they took advantage of government bad-bank plans to prepare for the next phase of the crisis.
  
• There are no major announcements due in the eurozone today, whilst at 15.00 BST in the US CB Consumer Confidence data is out.