The USD is lower vs the 3 major currency pairs as traders react to Moody’s downgrade

The USD is lower to start the trading week as investors sell US stocks, bonds after the Moody’s downgrade of US debt late Friday. The USD is down -0.90% vs the EUR, and -0.81% vs the GBP. to start the session The greenback is down -0.42% vs the JPY. The video above outlines the technical levels in play for those three major currency pairs.

As you likely know already, the rating agency Moody’s downgraded the U.S. sovereign credit rating on Friday from Aaa to Aa1, citing the nation’s soaring $36 trillion debt and persistent fiscal deficits. The move, which comes after similar downgrades by other agencies a year of so ago, signals growing concern over America’s long-term fiscal outlook and rising interest costs. While Moody’s shifted its outlook from “negative” to “stable,” the downgrade sparked backlash from Trump allies, who criticized the decision as politically motivated. The change could complicate President Trump’s efforts to cut taxes and balance the budget, especially as investors remain unconvinced by revenue-raising tariffs and cost-cutting measures. The announcement sent Treasury yields higher after the market close, raising the risk of bond market instability when trading resumes.

Meanwhiile, the House panel approved the Trump Tax cut plan. That will lead to a vote this week.

From the Fed, Atlanta Fed President Raphael Bostic this morning on CNBC warned that Moody’s downgrade could have wide-reaching effects across the economy and financial markets, particularly by raising the cost of capital and introducing greater uncertainty. He emphasized that it may take several months to fully understand the impact on U.S. debt demand and inflation from tariffs. Bostic noted the Fed is cautious on rate cuts, leaning toward just one this year due to the complex interplay of inflation, tariffs, and economic sentiment. While markets are functioning well, inflation remains above target and expectations are moving in a troubling way, although firms aren’t planning large layoffs. He highlighted a disconnect between economic sentiment and data and pointed to potential ripple effects from even reduced tariffs on China.

In geopolitical news, Israeli Finance Minister Smotrich stated that Israel aims to continue the war to push Gaza’s population southward and potentially out of the territory, according to Sky News Arabia. This comes as Israeli Prime Minister Netanyahu vowed to take full control of Gaza, while Israeli forces expanded ground operations and conducted airstrikes that killed at least 100 people. Israel’s government also said it would allow limited humanitarian aid into Gaza to prevent a hunger crisis. Pres. Trump said on Friday a lot of good things are going to happen over the next month in Gaza, but warned that something bad would happen if Iran does not move in nuclear talks.

Last week, Ukraine stated that Kyiv prioritizes a ceasefire in its ongoing discussions with the Russian delegation and is open to exploring a potential meeting between President Zelensky and President Putin. This aligns with earlier remarks from U.S. President Trump, who expressed willingness to meet with both leaders once arrangements are made. Attention now turns to determining the specific timing of any such meetings.

US stocks are lower with the futures implying:

• Dow Industrial average futures implying a decline of -258 point
• S&P index futures are implying a decline of -63 points
• Nasdaq futures are implying a decline of -311 points

In the European markets, the major indices are mixed:

• German Dax, unchange
• France’s CAC, -0.68%
• UK FTSE 100, -0.36%
• Spain’s Ibex, -0.24%
• Italy’s FTSE MIB, -1.80%

In the US debt market, yields are higher after the Moody’s downgrade

• 2-year yield 4.025%, +4.2 basis points
• 5-year yield 4.131%, +6.9 basis points
• 10-year yield 4.536%, +9.7 basis points
• 30-year yield 5.007%, +11.0 basis points

In other markets:

• Crude oil down $0.57 or -0.90% at $61.41
• Silver up $0.32 or 1.01% at $32.60
• Gold is up $40.62 or 1.27% at $3242.41
• Bitcoin is trading down $3790 at $102,719