NEW YORK ( BBH FX Strategy) -- Peripheral eurozone stresses are back in the spotlight with today's downgrades of Spain and Italy by Fitch.

While we are not surprised by the moves (more on that later), they did provide a grim reminder that the eurozone crisis remains far from settled within a deteriorating fundamental backdrop. The euro's rally has run out of steam around 1.35, having fallen a big figure since the downgrade news hit the wires. Here is a summary of recent ratings moves as well as our own sovereign ratings outlook.

Fitch today cut Italy by one notch to A+ from AA- with a negative outlook. However, this rating remains too high as our own internal ratings model has Italy at A-/A3/A- vs. actual ratings of A/A2/A+. Note that Italy showed remarkable stability in its credit standing during the early part of the crisis and stayed at an implied A+/A1/A+ for quite some time.

However, it has succumbed in recent quarters to fall to A-/A3/A- currently. Earlier this month, Moody's cut Italy three notches to A2 and last month, S&P cut Italy by one notch to A from A+. All three agencies have a negative outlook, so further downgrades appear likely.

Fitch today cut Spain by two notches to AA- from AA+ with a negative outlook. Here too, this rating remains too high as our own internal ratings model has Spain also at A-/A3/A- vs. actual ratings of AA/Aa2/AA-. On July 29 2011, Moody's put Spain's Aa2 on review for possible downgrade.

The three-month review period is not hard and fast, since a similar review of Italy resulted in a multi-notch downgrade after almost four months. Still, we fully expect Moody's to downgrade Spain in the next month or so, possibly multi-notch like Italy. S&P cut Spain by one notch to AA from AA+ back in April 2010, and is long overdue for a downgrade after it moved Spain's outlook to negative back in March 2011. All three agencies have a negative outlook, so further downgrades appear likely.

Fitch today also weighed in and said it retained its negative outlook on Portugal's BBB- rating, suggesting that a junk rating is still in the cards. Portugal's implied rating is now at BB-/Ba3/BB-. Earlier this month, S&P affirmed its BBB- rating but kept a negative outlook. In July, Moody's cut Portugal to a junk level Ba2 with a negative outlook. With all three agencies keeping a negative outlook, further downgrades to actual ratings of BBB-/Ba2/BBB- appear very likely.

To complete our tour of the periphery, note that our model gives Greece implied ratings of CCC-/Caa3/CCC vs. actual CC/Ca/CCC. Those ratings are still vulnerable to downward pressure as S&P has a negative outlook, Moody's has a developing outlook, and Fitch is at stable.

Ireland's implied rating of BB/Ba2/BB suggests actual ratings of BBB+/Ba1/BBB+ remain vulnerable to downgrade risk. But we note that S&P and Fitch have moved their outlooks to stable from negative, while Moody's has maintained a negative outlook on Ireland.

Looking beyond the periphery, note that Belgium's implied rating of AA/Aa2/AA suggests downgrade risk to actual AA+/Aa1/AA+ ratings remains alive. We note that Fitch has moved the outlook on its AA+ rating to negative, and follows a similar move by S&P back in December 2010. Political risk is a big negative factor for Belgium, as it has been over a year without a working government.

After Belgium, the next weakest in the core countries is France. We note that France remains marginally in AA+/Aa1/AA+ territory and so we expect increased scrutiny on the country in 2012. Because France is still on the borderline, we do not think downgrade risks are imminent, but the situation certainly bears watching. The fact that Moody's downgraded several French banks due to Greece exposure suggests that the sovereign will come under pressure next year.

Lastly, we believe the UK remains vulnerable to losing its AAA rating despite the aggressive fiscal tightening implemented by the Tory-led government. Austerity is taking a toll on the recovery, which will in turn hurt tax revenues. UK's implied rating is at AA/Aa2/AA vs. actual ratings of AAA/Aaa/AAA.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.