Recurrent rumors of a downgrade to France’s AAA rating continue to swirl this morning but the euro continues to rise. Why?
Could be that French banks are accelerating asset disposals overseas to bring money home to shore-up their balance sheets. The banks have shown very little willingness to sell new equity, preferring to shrink balance sheets instead.
I guess the thinking goes that the pressure to dispose of assets and improve capital ratios will increase if the sovereign is downgraded as the banks will surely be downgraded as well.
French bonds are badly under-performing German bonds today.
EUR/USD popped as high as 1.3820 as stops were triggered.
