After Spain was downgraded to a Sub-A rating, S&P has Italy at BBB+. Following that now Moody’s decreased Rome to under A to Baa2. On the other hand, only Fitch is still at A-, outlook negative. Usually, when all three rating agencies go sub A, there is a 5% ECB repo hike.
These are serious developments to be considered by binary option analysts and traders analyzing the Euro binary markets. Italy is a major member of the E.U. and the Italian stability has immediate impacts on the Euro binary markers in particular.
Moody’s decision to downgrade Italy’s ratings reflect the following key factors:
1. Italy is more likely to experience a further sharp increase in its funding costs due lost to an extend market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base.
2. Italy’s near-term economic outlook has deteriorated, in terms of both weaker growth and higher unemployment, which creates in greater risk of failure to meet fiscal consolidation targets. Failure to meet fiscal targets in turn could damagne the market confidence even further. Thus, making the risk of a sudden stop in market funding more likely.