I shared some early rate signs here:
- Opening Levels for Monday, Indicator FX Prices, May 19, 2025
The weekend brought quite a bit of news:
- The information didn’t really boost market confidence.
- UK Prime Minister Starmer is set to unveil a “reset” deal regarding Brexit on Monday. (Can we even say “Brexin”?)
- Australian PM Albanese announced he has reached a “contract” with Europe on free trade.
- ECB’s Lagarde mentioned justifying the uncertainty and loss of trust regarding the EUR/USD and U.S. policies.
- European Central Bank Board Member Schnabel advised caution regarding potential ECB rate reductions in June.
- ECB’s Kazaks noted that while rate cuts might be over, the outlook remains shaky.
- This past Friday, there was a significant move: Moody’s downgraded the U.S. credit rating.
Additionally, news updates include:
- A Romanian centralist presidential candidate is at 54.3% after 97% of the votes were counted.
- This weekend, without a trade contract, Bescent threatened to revert tariff rates to “mutual” levels.
- Former President Joe Biden has been diagnosed with an “aggressive form” of prostate cancer.
The win by centralist Nicola Dan in Romania’s presidential election, which saw him defeat right-wing candidate George Simion, has been interpreted as a positive development for Europe. Dan supports pro-European and pro-NATO policies. The EUR/USD is slightly up compared to Friday’s close.
The yen is also performing well, drawing interest as a safe haven following another downgrade to the U.S. LAT on Friday. The USD/JPY stands at around 145.32 as of my update.
Moody’s has downgraded the U.S. rating from “AAA” to “AA1,” a notable change given that Moody’s has held a full credit rating for the U.S. since 1917.
- Moody’s emphasized that consecutive U.S. administrations have failed to address the growing deficits and interest costs.
- Interestingly, Moody’s seems to be trailing; Fitch Ratings already downgraded the U.S. in 2023, and S&P Global Ratings followed suit.
