EU Morning Report

Dollar rebounds as risk aversion rises

  • The euro edged lower today weighed by a heightened risk aversion in the market. The single currency stepped off its recent highs weighed by investors' appetite for profit taking. ECB's decision to raise its benchmark lending rate by 25 bps to 1.25% pushed the euro to fresh highs against the dollar last week. Today, the euro dipped to 1.4377 versus the dollar from 1.4488.
  • The US dollar appears stronger against its major counterparts after a US budget agreement was reached and a government shutdown was avoided. As investors' risk appetite plummets, demand for the safe haven greenback starts to heal. Focus shifts to US Trade Balance and Import prices data expected later today.
  • The Japanese Yen strengthened against its major counterparts after a new earthquake hit Japan on Monday. Asian equities plummeted and investors' demand for riskier assets sharply dropped. Fears over the country's nuclear crisis are heightened after Japan's nuclear safety commission raised the international alert of the Fukushima nuclear plant. Against the yen, the dollar edged as low as 84.35 from 85.12.
  • The Australian dollar fell broadly as commodity prices ticked lower. The Aussie declined against the dollar trading as low as 1.0389 from 1.0563. The Aussie also plummeted against the Japanese Yen falling to 86.84 down from a two and a half year high at 90 yen.
  • Sterling plummeted against a stronger greenback today. The pair fell as low as 1.6277 from 1.6425. Attention now shifts to the UK inflation data due today at 8:30 GMT.
  • Oil prices retreated today weighed by profit taking as the greenback bounces back. Oil dipped to 107.81 dollars a barrel from 113.07. Gold also retreated to 1453.85 dollars an ounce from 1476.25. Silver edged as low as 39.71 dollars an ounce from 41.93.

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4345 with a preference to enter Long positions at 1.4355
  • § The USDJPY pivot point is at 84.50 with a preference to enter Short positions at 84.45              

Today's calendar and market movers:

  • § UK Consumer Price Index in March is forecasted to gain 0.6%
  • § US Trade Balance in February is forecasted to rise to -43.10B
  • § Bank of Canada is forecasted to keep interest rates unchanged at 1%

Equity Markets:

US equities were mixed on Monday with the S&P500 trading down -0.28% and the DJIA trading up 0.01%. The European bourses were negative with the FTSE trading down -0.04%, the DAX down -0.17% and the CAC down -0.57%. The NIKKEI and the HSI at the time of writing are trading down -2.1% and down -1.33% respectively.

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