EU Morning Report

Dollar slides following weak US data

  • The euro edged higher today breaking above the 1.43 level against the greenback. The single currency rose to 1.4337 dollars from 1.4206 but remains vulnerable to Greece's debt crisis. Policymakers failed to decide and agree on a solution to Greece's debt crisis and the uncertainty puts the euro under pressure. ECB President Jean-Claude Trichet is opposed to a Greek debt restructuring and said that Greece must focus on its consolidation efforts.
  • The US dollar plummeted yesterday after poor US data disappointed investors. The Leading Indicators Index, Existing Home Sales and Manufacturing survey failed to meet expectations fueling concerns about the US economic recovery. After the poor data speculators argue that the Federal Reserve will keep its interest rates at ultra-low levels for a longer period weighing on the dollar. Initial Jobless Claims also surprised the market by showing a fall to 409K but failed to support the dollar. Against the Swiss franc, the dollar jumped to 0.8879 from 0.8765.
  • Against the Japanese yen, the dollar rallied to 82.22 but during the US session the pair surrendered its gains to trade at 81.46. The Bank of Japan decided to keep its monetary policy unchanged after Gross Domestic Product revealed that Japan's economy shrank by 0.9% following the massive earthquake and tsunami that hit the country in March.
  • Sterling got a boost yesterday after higher than expected Retail Sales data. Higher inflation data combined with positive Retail Sales data indicate the need for an interest rate hike. But the ailing unemployment sector and slower growth forecast raise fears that monetary tightening at this point may lead the country in a state of stagflation. This is characterized by the simultaneous existence of a stubbornly high unemployment, sluggish growth and soaring price levels. Against the dollar, the British Pound traded as high as 1.6243 from 1.6130.
  • Oil prices ticked lower falling to 98.53 dollars a barrel from 100.79. Gold also fell to 1486.19 dollars an ounce from 1499.62. Silver edged lower at 34.53 dollars an ounce from 35.74.

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4225 with a preference to enter Long positions at 1.4235
  • § The USDJPY pivot point is at 81.45 with a preference to enter Long positions at 81.50             

Today's calendar and market movers:

  • § Canada Consumer Price Index in April is forecasted to gain 0.5%
  • § Canada Retail Sales in March is forecasted to gain 0.9% 

Equity Markets:                                             

US equities were positive on Thursday with the S&P500 trading up 0.22% and the DJIA up 0.36%. The European bourses were also positive with the FTSE trading up 0.55%, the DAX up 0.75% and the CAC up 1.25%. The NIKKEI and the HSI at the time of writing are trading down -0.02% and up 0.1% respectively.

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