ForexLive European FX news wrap: Risk stays on the defensive after US credit rating cut

<p>Headlines:</p><ul><li><a href="https://www.forexlive.com/news/a-more-cautious-mood-after-fitch-cuts-us-credit-rating-20230802/">A more cautious mood after Fitch cuts US credit rating</a></li><li><a href="https://www.forexlive.com/news/usdjpy-pushed-lower-amid-safety-flows-for-now-20230802/">USD/JPY pushed lower amid safety flows for now</a></li><li><a href="https://www.forexlive.com/news/what-is-priced-in-ahead-of-the-boe-policy-decision-tomorrow-20230802/">What is priced in ahead of the BOE policy decision tomorrow?</a></li><li><a href="https://www.forexlive.com/centralbank/bojs-uchida-says-may-step-in-before-10-year-yields-hit-1-depending-on-speed-of-the-move-20230802/">BOJ's Uchida says may step in before 10-year yields hit 1%, depending on speed of the move</a></li><li><a href="https://www.forexlive.com/centralbank/bojs-uchida-decision-to-make-ycc-flexible-not-a-move-towards-ending-ultra-loose-policy-20230802/">BOJ's Uchida: Decision to make YCC flexible not a move towards ending ultra loose policy</a></li><li><a href="https://www.forexlive.com/news/switzerland-july-manufacturing-pmi-385-vs-440-expected-20230802/">Switzerland July manufacturing PMI 38.5 vs 44.0 expected</a></li><li><a href="https://www.forexlive.com/news/switzerland-q3-consumer-confidence-271-vs-297-prior-20230802/">Switzerland Q3 consumer confidence -27.1 vs -29.7 prior</a></li><li><a href="https://www.forexlive.com/news/us-mba-mortgage-applications-we-28-july-30-vs-18-prior-20230802/">US MBA mortgage applications w.e. 28 July -3.0% vs -1.8% prior</a></li></ul><p>Markets:</p><ul><li>JPY leads, NZD lags on the day</li><li>European equities lower; S&amp;P 500 futures down 0.5%</li><li>US 10-year yields down 3 bps to 4.017%</li><li>Gold up 0.3% to $1,950.98</li><li>WTI crude up 0.7% to $81.96</li><li>Bitcoin up 1.1% to $29,550</li></ul><p>The big news on the day is Fitch downgrading the US' credit rating from AAA to AA+ <a href="https://www.forexlive.com/news/fitch-downgrades-usa-long-term-credit-rating-to-aa-from-aaa-20230801/" target="_blank" rel="follow">here</a>.</p><p>That is leading to risk aversion in markets as equities are lower and bonds are more bid. As European traders entered, the risk-off wave intensified but has abated somewhat now in the last few hours. S&amp;P 500 futures were down around 0.5% early on before deepening losses to 1.1% but are now back down by 0.5% on the day.</p><p>European indices observed a poor open but have also trimmed declines, though are still down by around 0.7% to 0.9% roughly at the moment.</p><p>In FX, it was the Japanese yen that found a bid on the session with USD/JPY from 142.90 to a low of 142.25 before reversing that to 142.80-90 levels again now – still down 0.3% on the day.</p><p>The dollar was steadier throughout, keeping little changed against the European currencies while the aussie and kiwi bore the brunt of the selling today.</p><p>AUD/USD is marked lower to its lowest in two months – down to 0.6575 at the moment – amid the more cautious risk mood and break below 0.6600 in Asia trading.</p><p>All eyes are now on US traders to see how they take to the key news but I reckon it won't be long till markets turn their attention to the US jobs report on Friday. In that lieu, we do have ADP employment data later to provide a bit of a teaser – even if it has not been an accurate indicator of what to expect from the non-farm payrolls.</p>

This article was written by Justin Low at www.forexlive.com.