EU Morning Report

Dollar plummets after the FOMC minutes

  • The euro edged lower against the dollar stepping off recent highs after rating agency Moody's downgraded Portugal's debt. Later the pair recovered its gains to trade higher after the dovish FOMC minutes. The euro remains supported by expectations the European Central Bank may raise interest rates by 25 basis points on Thursday. Against the dollar, the single currency rallied to 1.4280 from 1.41150.
  • The US dollar appears weaker after the FOMC minutes were release. The minutes confirmed speculation of divergence in views regarding the central bank's monetary policy. Even though Fed officials see an upside risk on inflation almost all agreed that they should finish the QE2 asset purchase program. Further weighing on the dollar was the ISM Non-Manufacturing data, which revealed weaker than expected figures. Against the Japanese Yen, the dollar rose to trade above the 85 level climbing to 85.51 from 84.15.
  • The Australian dollar plummeted against the dollar after the announcement that China's central bank raised the country's interest rates. This is the fourth rate hike since October as the country appears determined to stop prices from rising. The Aussie fell on the news as China is Australia's largest trade partner. Monetary tightening in China may negatively affect the demand for Australia's commodities. Against the dollar, the Aussie fell as low as 1.0287 but then recovered its losses to trade at 1.0374.
  • Sterling rallied against the greenback after Purchasing Managers Index services data revealed higher than expected figures. The pair climbed to 1.6337 from 1.6089. 
  • Oil prices remained elevated supported by geopolitical concerns and edged as high as 108.55 dollars a barrel. Gold rose to 1456.90 dollars an ounce from as low as 1429.88. Silver also ticked higher hitting a fresh high at 39.41 dollars an ounce.

Currency to watch out for: GBPUSD & USDJPY  

  • § The GBPUSD pivot point is at 1.6270 with a preference to enter Long positions at 1.6280
  • § The USDJPY pivot point is at 84.70 with a preference to enter Long positions at 84.75           

Today's calendar and market movers:

  • § Europe Gross Domestic Product in Q4 is forecasted to gain 0.3%
  • § UK Manufacturing Production in February is forecasted to gain 0.6%
  • § UK Industrial Production in February is forecasted to gain 0.4%

Equity Markets:

US equities were negative on Tuesday with the S&P500 trading down -0.02% and the DJIA trading down -0.05%. The European bourses are also negative with the FTSE trading down -0.16%, the DAX unchanged and the CAC down -0.03%. The NIKKEI and the HSI at the time of writing are trading down -0.06% and up 0.53% respectively.

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