Euro Unaffected by Portugal’s Downgrade

Yesterday Portugal's sovereign debt was cut to Baa1 from A3 by Moody's, keeping Portugal on review for further downgrades, citing upward revisions of Portugal's deficit and concerns over fiscal consolidation and structural reform. The euro retreated mildly on the announcement, but remains largely driven by ECB rate hike anticipations for the moment.

The FOMC minutes from the March 15th meeting confirmed what recent Fed speeches have suggested - a mild divergence of opinion is starting to emerge on the FOMC. The FOMC minutes revealed that some members felt the risks to inflation had shifted to the upside, although "almost all" Fed officials saw no need to taper asset purchases as QE2 nears an end. The minutes repeated that the recovery is gaining traction and overall reflected the recent shift in views from several Fed officials in recent weeks.

SNB Governing Board member Danthine again referred to the SNB's current policy issue. He repeated that, if the SNB only had to consider the real estate market and the domestic economy, then it would certainly hike interest rates. But given that different conditions are being experienced by Switzerland's exporters, there is limited scope for monetary policy adjustment. Taking the whole economy (domestic and export) into account, Danthine said the current setting of monetary policy is appropriate.