EUR/USD with slight daily losses after Fitch Ratings decision about US rating

The euro traded slightly lower against the US dollar on Wednesday, after Fitch ratings agency said that it could reduce the AAA rating of the United States, with policymakers continuing debates on nations debt limit in order to avert a potential default.

EUR/USD slipped to a session low at 1.3506 at 1:30 GMT, after which consolidation followed at 1.3516, losing 0.06% for the day. Support was likely to be received at September 27th low, 1.3475, while resistance was to be encountered at October 15th high, 1.3570.

After US markets closed on Tuesday, Fitch Ratings, the only ratings agency, that still has an AAA rating on the United States, put US Treasury bonds on “Rating Watch Negative”. This could be considered as a signal that Fitch was intending to reduce its rating on US sovereign debt. “The prolonged negotiations over raising the debt ceiling … risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S.”, the ratings agency said in a statement. “Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default”, according to the same statement.

Meanwhile, the Senate leaders in the United States were in a haste to reach an agreement in order to end the fiscal crisis, as the latter gained intensity after Republicans last minute deal failed on Tuesday. The emerging Senate accord might be announced as early as today, though its passage in the Republican-led House of Representatives was still far from assured.

A “clean” Senate bill to fund the US government and raise the debt ceiling would pass the House and, at the same time, if offered by the Senate, it will be presented for a vote by House Speaker Boehner, according to Pennsylvania Republican Representative Charles Dent in an interview on CNN. The US Treasury has warned that nations borrowing authority will lapse on October 17th, while the government will be left with about 30 billion USD at its disposal. Depending on daily tax receipts and incoming bills, the federal government might be forced to default on its debt obligations at any date thereafter, Bloomberg reported.

The ongoing partial government shutdown has probably dampened US economic prospects, as yesterday the New York Empire manufacturing index was reported to have fallen to a reading of 1.52 in the month of October, marking its lowest point in five months, after it stood at 6.29 in September. Experts remained surprised, as they had anticipated that the manufacturing index will reach 7.00. This, on the other hand, may urge the Federal Reserve Bank to postpone its intentions of phasing out the monetary stimulus for a while.

Elsewhere, the euro was steady against the pound, with EUR/GBP cross dipping a mere 0.02% to trade at 0.8454 at 7:29 GMT. Later in the day the United Kingdom will release data on jobless claims change and unemployment rate. EUR/JPY pair was gaining 0.22% on a daily basis to trade at 133.06 at 7:31 GMT.