U.S. stocks fell, pushing the Standard & Poor’s 500 Index to a two-month low, while Treasuries and the yen gained as the Federal Reserve said it would make further cuts to economic stimulus and as emerging-market currencies weakened. Gold and natural gas climbed.
Credit Suisse Group AG went against the consensus in June and correctly called the euro’s rally. Now, the bull has turned into a bear, with the firm predicting the common currency’s biggest annual drop in almost a decade.
The surprise decision by the European Central Bank to cut interest rates means there’s now about an even chance that the euro, this year’s best-performing major currency, will erase all of its gains in a matter of months.
The foreign-exchange market is signaling more pain ahead for currencies that benefit from a sustained global recovery, five years after the onset of the worst financial crisis since the Great Depression.
The pound dropped for a second week against the dollar after Moody’s Investors Service cut the U.K.’s AAA credit rating and Bank of England Governor Mervyn King’s indicated he backed more economic stimulus.