httpvh://www.youtube.com/watch?v=djjWBKBxiqY

So Greek debt is now ‘junk’. Another crushing inevitability in a world chock full of them. Rooney becoming PFA player of the year? Yep. The Goldman hearings appearing like kids being shouted at by crotchety old people? Yep, that too.

S&P pushed Greek debt to BB+, a junk rating, yesterday and told the market that, in their estimations, investors in Greek debt were only 30-50% likely to get their money back such is the risk of restructure/default. This blew out the yields and swap spreads once again while Greek stocks fell by 7% by the close. In the grand scheme of things this changes very little. Greece can still obtain loans from the ECB and use its debt as collateral as Moody’s still rates Greece above BBB+. Reports this morning show that the IMF will set aside further funds for Greece, the negotiations are ongoing.

Greece wasn’t the only country that saw their credit rating cut as Portugal was moved to A- as the fear of contagion increases. So here’s another crushing inevitability; the euro got smoked by the market and pushed to a new year’s low against the dollar of 1.3146. It is fairly stable against the pound however as sterling falls against the dollar stymied any real gains.

Any data out yesterday was completely overshadowed by the news out of Greece and Portugal but UK mortgage approvals were lower and the CBI’s distributive trade survey was also fairly downbeat. US home prices were also lower however US consumer confidence jumped to a 12 month high.

Today will be another day of slaughter in Southern Europe you’d expect with the lack of data. We do have the Fed meeting tonight at 19.15 and we think that we will see USD strength in the aftermath.