EU Morning Report

Dollar falls as risk appetite gets a boost

  • The euro recovered some of its losses against the dollar supported by interest rate hike expectations. Yesterday, an ECB policymaker, Luc Coene said that April's rate hike was not a one-off and that monetary policy needs to adjust to the higher inflation and growth in the region. Further supporting the euro is Germany's Gross Domestic data that showed an expansion of 1.5% higher than expected. The single currency recovered from a six-week low versus the greenback rising to 1.4276 from 1.4123 but remains under pressure on worries about Greece's debt problems. The euro also rose against the sterling trading as high as 0.8753 from 0.8672.
  • The US dollar plummeted against a basket of currencies as risk appetite recovered during yesterday's US session. Initial Jobless Claims dropped to 434K and retail sales rose 0.5% in April. Also, Producer Price Index surprised investors by showing a 0.8% gain in April and now focus turns to today's Consumer Price Index data. Against the Swiss franc, the greenback got a boost yesterday jumping as high 0.8904 but later it dipped to 0.8825. Against the Japanese yen, the dollar slid to 80.44 from 81.33 traded yesterday.
  • The Australian dollar plunged yesterday against the dollar weighed by the falling commodity prices and poor employment data. The Aussie is also weighed by China's decision to increase the banks' reserve requirements in an effort to fight inflation. Against the dollar, the Aussie dipped to 1.0566 from 1.0705.
  • Sterling fell after Industrial and Manufacturing production data revealed lower than expected figures. The poor numbers knocked the British pound to a three week low against the dollar as interest rate hike expectations started to fade. The pair slid to 1.6234 from 1.6377 and it was traded at 1.6268.
  • Oil prices recovered yesterday climbing to 100.44 dollars a barrel from 95.24. Gold also rose to 1508.72 dollars an ounce from 1477.99. Silver bounced hitting 35.48 dollars an ounce from 32.31. 

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4280 with a preference to enter Short positions at 1.4270
  • § The USDJPY pivot point is at 80.75 with a preference to enter Long positions at 80.85             

Today's calendar and market movers:

  • § Europe Gross Domestic Product in Q1 is forecasted to gain 0.6%
  • § US Consumer Price Index in April is forecasted to gain 0.4%
  • § US Consumer Sentiment Index in May is forecasted to rise to 70

Equity Markets:                                               

US equities were positive on Thursday with the S&P500 trading up 0.49% and the DJIA up 0.52%. The European bourses were negative with the FTSE trading down -0.52%, the DAX down -0.68% and the CAC down -0.86%. The NIKKEI and the HSI at the time of writing are trading down -1.13% and -0.44% respectively. 

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