France's rating outlook downgraded, institution says euro's rebound is limited

⑴ ING stated that last Friday evening, Fitch conducted an unscheduled review of France’s sovereign debt rating, revising its outlook from stable to negative and committing to another rating review by the end of February next year. France is currently rated A+. ⑵ The institution pointed out that the reasons for the outlook adjustment are already quite familiar, mainly due to the government’s failure to improve public finances amidst weak growth. ⑶ The institution added that it will observe whether this unscheduled move places significant pressure on the yield spread between French and German government bonds today, and believes this news limits the euro’s room to rebound against the US dollar following the recent decline in energy prices. ⑷ The institution suspects that if EUR/USD rises to the 1.1200–1.1250 range, more sellers will emerge. This news should also put pressure on EUR/CHF, pushing it closer to Friday’s lows around 0.9180–0.9185.