EU Morning Report

Dollar weakens as the Libya unrest escalates

The euro rallied against the dollar today supported by a hawkish stance by European Central Banks officials. Investors argue that the ECB has no other choice but to adjust the monetary policy as the rising commodity prices worsen the region's inflation pressures. After ECB officials' hawkish comments eyes now turn on the tone of the ECB at the next meeting. The euro edged as high as 1.3777 dollars today from 1.3711 traded in early Asian session.

Escalating tensions in Libya continue to weigh on the US dollar. Friday's economic data from the US revealed that the Annualized Gross Domestic Product in the US fell more than expected. Surging oil prices drag the dollar lower as it is consider negative for the US economy and global growth. The greenback resumes its downward direction against the safe haven Swiss franc edging as low as 0.9259 dollars. Against the Japanese Yen, the dollar slid hitting a three week low at 81.61 from 82.04. 

The Australian dollar fell in the early Asian session after Beijing announced a lower economic forecast in China. China is Australia's largest trade partner and the lower GDP forecast pushed the Aussie as low as 1.0125 against the dollar. Later, the Aussie recovered its losses supported by gains in world equities and a demand for higher yielding currencies. Against the greenback, the Aussie hit a three week high at 1.0182 and the pair was last traded at 1.0176.

The US dollar plummeted to a three year low against the Canadian dollar weighed by the rising oil prices. The pair slid as low as 0.9757 from 0.9826 traded on Friday.

Oil ticked higher today as investors fear the escalating unrest in Libya can spread to other oil producing countries which, in turn, can hurt oil supplies. Oil rose as high as 99.79 dollars a barrel today. Gold prices inched up as the Libya tensions and the rise of oil to record high levels spurred inflation concerns. The precious metal rose to 1416.35 dollars an ounce today on fears that the violent situation in Libya will have a negative impact on global growth.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3715 with a preference to enter into Long positions at 1.3725
  • § The USDJPY pivot point is at 82.00 with a preference to enter Short positions at 81.95              

Today's calendar and market movers:

  • § Europe Consumer Price Index in January is forecasted to fall 0.6%
  • § Canada Gross Domestic Product Annualized in Q4 is forecasted to rise 2.9%
  • § US Pending Home Sales in January is forecasted to fall 2.6%

Equity Markets:

US equities were positive on Friday with the S&P500 trading up 1.06% and the DJIA trading up 0.51%. The European bourses are also positive with the FTSE trading up 1.37%, the DAX up 0.77% and the CAC up 1.51%. The NIKKEI and the HSI at the time of writing are trading up 0.92% and up 0.79% respectively.

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