News Headline Summary

Moody's downgrades France's government bond rating to Aa1 from Aaa, maintains negative outlook

Says:

- France long-term growth outlook hit by structural challenges.
- France has gradual and sustained loss of competitiveness.
- France has labour, goods, service markets rigidity.
- France's fiscal outlook is uncertain as a result of its deteriorating economic prospects.
- The predictability of France's resilience to future Euro area shocks is diminishing in view of the rising risks to economic growth, fiscal performance and cost of funds.
- France's exposure to debt crisis has been rising and in the case of need may not benefit from ECB facilities, ESM given that resources may have already been exhausted.
- Limited magnitude of rate cut reflects French government's ongoing reform programme, long-term growth perspectives.

Reaction details (22:12)

- EUR/USD immediately moved down 29 pips from 1.2813 to 1.2784, trades 1.2788 (-24pips) last.

Analysis details (22:30)

- This is in-line with the previous reports that we had at 2155GMT that France would be downgraded.
- Currently the only ratings agency to have France AAA is Fitch, who also have them on a negative outlook.
- Today's 1-notch downgrade from Moody's puts them in-line with S&P.

19 Nov 2012 - 22:09 - - Source: Newswires

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