Euro shrugs off Portugal downgrade and remains firm against dollar, sterling and swissy today. Standard and Poors downgraded credit rating for Portugal two notches from A- to BBB after resignation of Prime Minister Socrates, following rejection of the new austerity measures on Wednesday by the parliament. The rating agency noted that ” increased political uncertainty could hurt market confidence and heighten Portugal’s refinancing risk” and it will take “at least two months to both hold elections and to form a new government”. The rating agency also warned the another one notch downgrade as early as next week depending on the final outcome of EU summit on ESM and the likelihood Portuguese government bondholders become subject to a restructuring. This also followed Fitch’s two notch downgrade of Portugal yesterday.

OECD secretary-general Angel Gurria said political turmoil in Portugal led to a partly “self-inflicted injury” and it’s making a bailout “more likely” even though he “would not say” it’s unavoidable. On the other hand, Gurria hailed that Spain has been “admirable” in addressing it’s deficit, labor markets and pensions. The final outcome of the two day EU summit will be closely watched today. Meanwhile, Euro should remain firmly supported by expectation of April hike from ECB. Euro’s strength against sterling would likely extend further with EUR/GBP taken out a medium term trend line resistance this week as speculation for Q2 BoE hike cooled down.

While Euro is strong, Aussie and Loonie are even stronger as supported by commodity prices. Gold made another record high at 1448.6 before retreating. Meanwhile, crude oil is trading above above 105 level and is trying to take on recent high of 106.95. Risk sentiments are also positive with DOW up 84 pts overnight while Nikkei is up another 1%. AUD/USD is now having 1.0254 record high in sight and would likely take it out in near term.

On the data front, Japan national core CPI dropped -0.3% yoy in February, corporate service price dropped -1.0% yoy. German Gfk consumer sentiment, EUrozone M3, German Ifo will be featured in European session. US Q4 GDP final will be released in US session.

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