EU Morning Report

Australian dollar plummets following RBA policy meeting

  • The euro edged lower yesterday after European officials said that further financial aid for Greece is not certain and that Greece's debt crisis is far from over. Eurogroup Chairman Jean-Claude Juncker said that the euro is overvalued further putting the single currency under pressure. Focus now turns to the European Central Bank Interest Rate meeting this week where investors expect hawkish comments on inflation. The euro remains well supported by interest rate hike expectations while the US dollar is likely to resume its loose monetary policy for an extended period of time. Yesterday the European Central Bank President Jean-Claude Trichet kept a hawkish stance during his speech saying that policy must adjust in order to ensure price stability in the euro zone. Against the dollar, the euro fell as low as 1.4556 from 1.4657 and today the pair recovered its losses to trade at 1.4639.
  • The US dollar recovered mildly against a basket of currencies yesterday. Philadelphia Fed President Plosser's hawkish comments supported the greenback after he said that the disappointing employment data does not change the outlook for the US economy and that monetary tightening may occur by the end of the year. Against the safe haven Swiss franc the dollar edged higher at 0.8374 from 0.8329. Against the Japanese yen, the dollar dipped below the 80 level trading as low as 79.97 from 80.39. 
  • The Australian dollar dropped sharply after the Reserve Bank of Australia kept interest rates unchanged at 4.75% today. In the following statement, the Reserve Bank of Australia sounded less hawkish saying that rates are at appropriate levels indicating that monetary tightening may not occur in the near term. Against the dollar, the Aussie dipped to 1.0672 from 1.0767.
  • Oil prices fell to 98.28 dollars a barrel from 100.46. Gold jumped to 1553.45 dollars an ounce and retreated to trade at 1541 during the US session. Silver edged higher at 37.26 dollars an ounce but later fell to 36.31.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4555 with a preference to enter Long positions at 1.4565
  • § The USDJPY pivot point is at 80.40 with a preference to enter Short positions at 80.35
  • § The OIL pivot point is at 99.40 with a preference to enter Short positions at 99.40
  • § The Gold pivot point is at 1535 with a preference to enter Long positions at 1535                          

Today's calendar and market movers:

  • § Switzerland Consumer Price Index in May is forecast to fall 0.1%
  • § Europe Retail Sales in April is forecast to gain 0.4%

Equity Markets:                                               

US equities were negative on Monday with the S&P500 trading down -1.08% and the DJIA down -0.5%. The European bourses were mixed with the FTSE trading up 0.14%, the DAX down -0.34% and the CAC down -0.7%. The NIKKEI and the HSI at the time of writing are trading up 0.44% and down -0.72% respectively.

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