EU Morning Report

The dollar plummeted after Bernanke's dovish tone

  • The US dollar fell during the US session after rating agency Moody's warned that the United States may lose its Aaa credit rating. Moody's action to place the US rating under spurred risk aversion pushing precious metals to new highs. The dollar also took a hit after Fed Chairman Ben Bernanke's dovish tone during his testimony to the Congress. He emphasized on concerns over the economic recovery and said that the prospect of further monetary easing is still alive. Against the Japanese yen, the dollar dipped to 78.46 but then rebounded to 79.60 on fears that the central bank may intervene to sell the yen.
  • The euro rose against a basket of currencies yesterday after Bernanke's comments that another round of monetary stimulus may be needed. But the euro remains fragile as stress tests are being conducted on European banks this week. Rating agency Fitch cut Greece's rating to CCC and explained the move as a result of the absence of a new and credible plan by the International Monetary Fund. Against the dollar, the single currency edged as high as 1.4281 from 1.3961.  
  • The New Zealand dollar rallied today after a report showed the country's Gross Domestic Product rose by more than expected in the first quarter. The unexpected bounce in the country's growth rate boosted speculation that the Reserve Bank of New Zealand may raise interest rates this year. Versus the dollar, the Kiwi gained 3.8% jumping as high as 0.8503 from 0.8192 traded yesterday.  
  • Sterling rose against the dollar to 1.6194 from 1.5780. However, fears about the UK economy still surround the sterling after employment data showed a rise of unemployed people in the country. The poor jobs data raised speculation that interest rates may remain at low levels for an extended period of time.
  • Oil prices rose to 99.19 dollars a barrel today from 96.52. Gold edged higher to a new record high at 1588.05 dollars an ounce from 1564.20. Silver rose to 38.73 dollars an ounce from 34.78.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4110 with a preference to enter Long positions at 1.4120
  • § The USDJPY pivot point is at 79.15 with a preference to enter Short positions at 79.10
  • § The OIL pivot point is at 96.50 with a preference to enter Long positions at 96.50
  • § The Gold pivot point is at 1572 with a preference to enter Long positions at 1572                         

Today's calendar and market movers:

  • § Europe Consumer Price Index in June is forecast to gain 2.7%
  • § US Producer Price Index in June is forecast to fall by 0.2%
  • § US Retail Sales in June is forecast to fall by 0.1%
  • § US Initial Jobless Claims is forecast to fall to 415K

Equity Markets:                                              

US equities were positive on Wednesday with the S&P500 trading up 0.31% and the DJIA up 0.36%. The European bourses were also positive with the FTSE trading up 0.64%, the DAX up 1.31% and the CAC up 0.51%. The NIKKEI and the HSI at the time of writing are trading down -0.24% and -0.6% respectively.

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