EU Morning Report 

Approval of phase one austerity vote lifts the euro

  • The euro rallied after the Greek parliament voted in favor of the new austerity package. Today, we expect the second phase of the austerity vote to be completed where the parliament is expected to pass the legislation required to apply the new austerity plan. Even though investors expect today's vote to pass, it remains to be a crucial moment for Greece as well as the Eurozone as failure to vote in favor of the plan may lead to a Greek default. The five-year 78 billion euro austerity plan includes further tax hikes and deep spending cuts agreed by the EU and the IMF which will secure a second round of financial aid for Greece. The single currency is also supported by interest rate hike expectations as hawkish comments by ECB policymakers signaled a July rate hike. Investors expect Eurozone inflation data to be released today at 9:00 GT and higher than expected figures may provide further support for the single currency. Against the dollar, the euro climbed above the 1.4500 level to reach 1.4518 from 1.4328.
  • The US dollar is weaker against a basket of currencies today on an improved risk appetite in the market. Focus turns to Initial Jobless Claims expected later today. Against the safe haven Japanese yen, the dollar dipped to 80.30 from 81.18. Against the Canadian dollar, the US dollar slid to a one month low at 0.9667 from 0.9824 after Consumer Price Index surprised the market by showing higher than expected May figures.
  • The Australian dollar firmed against the greenback as fears of a Greek default begin to ease. The pair hit a three-week high at 1.0750 gaining 3.5% from the beginning of the week when it traded at 1.0390. Sterling also rose recovering from a five-month low versus the dollar to trade at 1.6118 from 1.5970.
  • Oil prices gained 3.6% rising to 95.82 dollars a barrel from 92.51. Gold rose to 1514.06 dollars an ounce from 1500.59. Silver also ticked higher at 35.11 dollars an ounce from 33.81.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4425 with a preference to enter Long positions at 1.4425
  • § The USDJPY pivot point is at 80.70 with a preference to enter Short positions at 80.70
  • § The OIL pivot point is at 94.00 with a preference to enter Long positions at 94.00
  • § The Gold pivot point is at 1503 with a preference to enter Long positions at 1503                       

Today's calendar and market movers:

  • § Europe Consumer Price Index in June is forecast to gain 2.8%
  • § US Initial Jobless Claims is forecast to fall to 420K
  • § Canada Gross Domestic Product in April is forecast to fall 0.1%

Equity Markets:                                              

US equities were positive on Wednesday with the S&P500 trading up 0.6% and the DJIA up 0.83%. The European bourses were also positive with the FTSE trading up 1.54%, the DAX up 1.73% and the CAC up 1.88%. The NIKKEI and the HSI at the time of writing are trading up 0.25% and 1.7% respectively.

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