Euro softer as Spanish downgrade, EU forecasts weigh

News that Spain lost its AAA credit rating combined with the release of very downbeat EU GDP forecasts sent EUR/USD lower this morning after a firm start in Asia. S&P warned last week that the rating could be cut and made good on the threat this morning.

The EU radically chopped its growth outlook for the eurozone to -1.9% in 2009 from the prior +0.1 forecast. The ECB staff still sees just a 0.5% decline, though fresh forecasts will be available for the March meeting where a further cut is expected. Trichet just said on the wires that the forecasts will be taken down substantially.

1.3200 is providing support near-term with more at 1.3180/85. If broken, 1.3115 is the next near-term target.