European session: Euro heads for second weekly drop

Data

07:15 Switzerland Producer & Import Prices, m/m June -0.2% -0.2% -0.3%

07:15 Switzerland Producer & Import Prices, y/y June -2.3% -2.2% -2.2%

The euro headed for a second weekly decline against the dollar after Moody’s Investors Service cut Italy’s credit rating, adding to concern the region’s debt crisis is worsening.

The 17-nation currency was 0.3 percent from a six-week low versus the yen as the ratings company cited the nation’s “weaker growth and higher unemployment” and risks to market funding.

Moody’s lowered Italy’s government bond rating by two levels to Baa2 and said further downgrading was possible, according to a statement released today in Frankfurt. That’s two levels above junk and one above SpainThe euro pared losses versus the greenback today after Italy’s borrowing costs fell at a debt sale.

The British pound rose after the Bank of England and the Ministry of Finance announced the launch of the program loan financing (FLS), which will become effective on August 1. Using the FLS will allow the banks to abandon expensive wholesale funding in favor of cheaper by the central bank, but only if they use these funds for loans for home buyers and businesses.