EU Morning Report

Australia's central bank keeps interest rates on hold

  • The US dollar strengthened after US policymakers reached a deal on the US debt ceiling but the greenback failed to hold on to its gains as the thread of a downgrade by rating agencies is still alive. Investors were disappointed after data showed sluggish US Manufacturing figures in July spurring concerns about the health of the world's largest economy. Against the Japanese yen, the dollar took a dive to a four-month low at 76.29 but later the pair recovered to 77.81 on fears the Bank of Japan will intervene in the currency markets to stem the yen's rise. Versus the Swiss franc, the dollar hit a fresh record low at 0.7851 from 0.7952.
  • The euro shed 1.9% against the dollar dropping to as low as 1.4185 from 1.4453. Risk aversion in the market remains heightened despite the agreement reached by US policymakers on the US debt ceiling. Eurozone debt contagion fears continue to weigh on the single currency as Cyprus is feared to be the next country seeking for help by the International Financial Stability Facility. Attention now shifts to the eurozone Producer Price Index released at 09:00 GMT which may be an indication of inflation in the euro area. 
  • The Australian dollar fell after the Reserve Bank of Australia interest rate decision. The market was pricing in a possible interest rate hike but the central bank disappointed the markets by keeping rates on hold at 4.75%. The accompanying statement revealed a neutral stance saying that inflation is forecast to moderate in the coming months and the central bank also expressed concerns about the slowdown in global growth. Versus the dollar, the Aussie plummeted to 1.0910 from 1.1064.
  • Oil prices shed 5.2% sliding to 93.44 dollars a barrel from 98.55. Gold edged higher to 1631.55 dollars an ounce from 1609.31. Silver also ticked higher to 40.02 dollars an ounce from 39.01.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4300 with a preference to enter Short positions at 1.4290
  • § The USDJPY pivot point is at 77.00 with a preference to enter Long positions at 77.05
  • § The OIL pivot point is at 95.45 with a preference to enter Short positions at 95.45
  • § The Gold pivot point is at 1613 with a preference to enter Long positions at 1613                          

Today's calendar and market movers:

  • § Europe Producer Price Index in June is forecast to gain 0.1%
  • § US Personal Income in June is forecast to gain 0.2% 

Equity Markets:                                               

US equities were negative on Monday with the S&P500 trading down -0.41% and the DJIA down -0.09%. The European bourses were also negative with the FTSE trading down -0.70%, the DAX down -2.86% and the CAC down -2.27%. The NIKKEI and the HSI at the time of writing are trading down -1.21% and -0.63% respectively. 

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