EU Morning Report

The dollar remains supported by a heightened risk aversion

  • The US dollar rose yesterday supported by heightened risk aversion in the market. Poor economic data from China and the US increased fears on the global economic slowdown. PMI data from China dipped to an eleven-month low while US Initial Jobless Claims jumped more than expected. The greenback is also supported by the Fed Chairman Ben Bernanke's press conference where he emphasized on inflation and the central bank's determination to maintain price stability. He also said that the 600 billion quantitative easing program will end by the end of June and signaled no additional easing. His comments gave the dollar a boost and pushed it higher against a basket of currencies. Against the Japanese yen, the dollar jumped to 80.79 from 80.33. Focus turns to the annualized Gross Domestic Product in the first Quarter.
  • The euro resumed its fall against its major counterparts as investors remain cautious on the eurozone debt crisis. Further weighing on the euro were comments by the ECB President Jean-Claude Trichet, who emphasized on the risks that the European debt crisis poses on the financial stability. Against the stronger dollar, the euro shed 1.4% falling to 1.4126 from 1.4333. Later in the US session, the euro rebounded to 1.4276 after the EU and the IMF agreed on an austerity plan for Greece. The plan includes further tax hikes and deep spending cuts which will secure a second round of financial aid for Greece.
  • Sterling remains under pressure as investors' expectations for an interest rate hike start to fade. Recent economic data from the UK disappointed investors who were expecting a tightening of the monetary policy by the end of the year. Further pressuring the dollar was the release of the BoE meeting minutes that revealed a dovish stance by the MPC policymakers and the possible need of additional quantitative easing. Versus the dollar, sterling fell to a nearly three month low at 1.5937 from 1.6066.
  • Oil prices fell to 89.70 dollars a barrel from 94.34. Gold shed 2.3% falling to 1512 dollars an ounce from 1547.72. Silver also shed 4.7% edging as low as 34.63 dollars an ounce from 36.32. 

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4190 with a preference to enter Long positions at 1.4190
  • § The USDJPY pivot point is at 80.35 with a preference to enter Long positions at 80.35
  • § The OIL pivot point is at 93.35 with a preference to enter Short positions at 93.35
  • § The Gold pivot point is at 1535.15 with a preference to enter Short positions at 1535.15                      

Today's calendar and market movers:

  • § US Gross Domestic Product Annualized in Q1 is forecast to gain 1.9%
  • § US Durable Goods Orders in May is forecast to gain 1.5%

Equity Markets:                                            

US equities were negative on Thursday with the S&P500 trading down -0.28% and the DJIA down -0.49%. The European bourses were also negative with the FTSE trading down -1.71%, the DAX down -1.77% and the CAC down -2.16%. The NIKKEI and the HSI at the time of writing are trading up 0.87% and 1.42% respectively.

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