At the start of the new week, the euro is being supported by the weekend updates of Moody’s ratings for Italy and Portugal. Last week, there was considerable speculation about the risk of Italy’s credit rating being downgraded to "junk" level. However, markets were able to breathe a sigh of relief over the weekend, as the rating was not only maintained but even improved. In Italy's case, Moody's kept the Baa3 rating, one notch above junk, but changed the outlook from negative to stable. This decision was a surprise to many analysts who did not expect any changes. The reasons given for the improved outlook included stable prospects for Italy’s economic strength, the condition of the banking sector, and public debt dynamics. In the third quarter, the Italian economy showed stagnation after a decline earlier in the year, and it is expected that Italy’s debt will slightly increase from 140% to 141% of national output by 2025. Despite these challenges, the Italian government, led by Prime Minister Giorgia Meloni, views the rating as confirmation of effective work and a promising outlook for the country’s future.
Even more positive was the credit rating assessment for Portugal. Moody’s raised Portugal's long-term issuer rating by two notches to A3 from Baa2, despite the country's political instability marked by the resignation of the prime minister. This upgrade reflects the resilience and stability of Portugal's economy.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app
The market reaction to these updates has been positive, with a significant decrease in the risk premium for both Italian and Portuguese debts. The yield difference between 10-year Italian and German bonds, an indicator of perceived risk, fell to a two-month low, illustrating increased market confidence in Italian debt. The spread between Portuguese and German bonds also fell slightly.
The positive assessment from the agency also acted as a catalyst for the continuation of gains in the EURUSD pair. On Monday, the rate gained 0.24% and is increasingly approaching the psychological barrier of 1.10. For bulls, an important test will be the level of 1.094, which is both a resistance line and the 61.8% Fibonacci retracement level of the last downward movement. Source: xStation 5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
