Euro falls on Portugal debt rating downgrade

Credit rating agency Moody’s Investor Service has today cut Portugal’s debt rating by two notches, sending the euro down against the dollar and the pound.

Moody’s downgraded Portugal’s rating by two notches to A1, citing weak growth and suggesting it may need fresh austerity measures next year to reach fiscal targets.

However, in a statement, Portugal’s finance ministry said the downgrade was expected by the markets, saying Moody’s was “realigning” with other rating agencies.

Moody’s said it expected the Portuguese Government’s debt metrics to deteriorate for at least two to three years, with the debt-to-GDP ratio ultimately reaching 90%.

Anthony Thomas, vice president of Moody’s, said Portugal remained in the high end of investment grade and its outlook was now stable, which means there is no revision planned for a year.

Portugal’s finance ministry concluded: “By placing the rating under a stable outlook, Moody’s is signalling its confidence in the current economic policy strategy of the Portuguese government.”

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