Moody’s French banks downgrade “expected”
Moody’s decision to downgrade Crédit Agricole and Société Générale was “expected” following news that the rating agency had turned its attention to the French banks, according to Clive Lennox, head of foreign exchange trading at Clear Currency.
“We heard rumours on Monday that Moody’s was looking at the French banks, and there was a lot of selling off [of shares] in the banking sector,” Lennox said.
Moody’s announced on Wednesday that it had downgraded by one notch Société Générale’s long-term ratings to Aa3 and Crédit Agricole’s long-term ratings to Aa2, citing the two banks’ exposure to the Greek economy.
“It’s unfortunate but it looks like Greece is having a knock-on effect on other countries. There’s definitely a negative bias in the market,” Lennox said.
The euro currency has also been under rising pressure as China indicated that it would not come to the aid of Italy by buying up its debt. Instead it has recommended that European countries should press ahead with reforms and initiate necessary fiscal and monetary policies.
The eurozone needs to show strong leadership and make sure that policies are implemented to overcome the present crisis, Lennox said.