In US trade, the euro showed meek resistance and fell effortlessly below the 1.25 level, as a spate of negative European news weighed on sentiment.
Headlining the European/US sessions was news that Egan Jones, a small private rating agency had downgraded Spain from BB- to B, as well as reports in the Financial Times that the ECB had rejected Spain's plan to finance the recapitalisation of its banking sector via the direct injection of sovereign bonds.
The rejection raises the prospect of increased Spanish sovereign issuance at a time when investor demand for Spanish paper is waning. Also negatively affecting sentiment was Chinese news agency Xinhua quashing expectations of fresh large-scale stimulus from China by reporting: The Chinese government's intention is very clear’. It will not roll out another massive stimulus plan to seek high economic growth.
Having ended yesterday’s Australian session around the 1.2535 level, the euro drifted to close US trade at 1.2504 having traded as low as 1.2461. Upon reopening for the Asian session, the euro has again slipped below the 1.25 handle to be currently trading in the 1.2470 range.