Currency market: EUR/USD jumps to 1.1362
The EUR/USD pair appreciated sharply by +1.78% to 1.1362.
The US Dollar fell significantly this week following Moody's downgrade of the United States' sovereign credit rating from AAA to Aa1. The underlying reason lies in the unsustainable burden of the US public debt, which stands at $36.2 trillion. Now, all three major rating firms have withdrawn the U.S. AAA rating. It should be noted that this decision comes as President Trump introduced a new tax bill expected to increase public debt and widen the fiscal deficit by more than $3 trillion over the next decade, according to estimates by the US Congress.
USD/MAD hits a 3-year low
The USD/MAD pair depreciated -0.86% to 9.21 this week, below three-year low. This evolution was driven by a double negative effect. On the one hand, a basket effect of -0.75% related to the Dollar's depreciation this week following Moody's downgrade of the United States' AAA rating. On the other hand, the market effect stood at -0.11%. The Dirham's liquidity spreads thus eased slightly by -11 BPS, still at over three-year lows, at -4.70%, thanks to lower import flows related to the decrease of energy prices. These levels are approaching the lower band of the Dirham's fluctuation band, at -5.0%.
Concerns about global economic growth
Uncertainties related to trade tensions, particularly between the United States and its main trading partners (China and the EU), persist which fuel concerns about global economic growth and international currencies volatility. As such, significant currency volatility is expected. We recommend traders to hedge their transactions over time horizons from 1 month to 3 months.
