EU Morning Report

ECB President's hawkish stance boosts the euro

  • The euro remains firm against its major counterparts on optimism that the Greek parliament will approve the new austerity package at 12 GMT later today. Today's vote is a crucial moment for Greece as well as the Eurozone as failure to vote in favor of the plan may lead to a Greek default. The five-year austerity plan includes further tax hikes and deep spending cuts agreed by the EU and the IMF which will secure a second round of financial aid for Greece. The single currency is also supported by interest rate hike expectations as hawkish comments by the ECB President Jean-Claude Trichet signaled a July rate hike. Against the dollar, the euro gained 1.6% climbing to 1.4396 from 1.4237.
  • The US dollar is weaker against a basket of currencies today on an improved risk appetite in the market. Consumer Confidence data revealed a lower than expected figure, the lowest in eight months. Against the safe haven Japanese yen, the dollar jumped to 81.26 from 80.65 on higher US Treasury yields.   
  • Sterling plummeted to a five-month low versus the dollar as Bank of England policymakers expressed a dovish tone keeping alive the prospect of additional quantitative easing. The comments disappointed investors who were expecting a tightening of the monetary policy by the end of the year. The Bank of England policymakers emphasized on their concerns over the UK economic slowdown, while annual Gross Domestic Product was revised down in the first quarter. Versus the dollar, sterling dipped to 1.5911 and then recovered some of its losses to trade at 1.6044.
  • Oil prices edged higher at 93.11 dollars a barrel from 90.43. Gold rose to 1506.14 dollars an ounce from 1495.44. Silver also ticked higher at 34.19 dollars an ounce from 33.51.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4325 with a preference to enter Long positions at 1.4325
  • § The USDJPY pivot point is at 80.85 with a preference to enter Long positions at 80.85
  • § The OIL pivot point is at 89.90 with a preference to enter Long positions at 89.90
  • § The Gold pivot point is at 1490 with a preference to enter Long positions at 1490                         

Today's calendar and market movers:

  • § Europe Consumer Confidence in June is forecast to fall to -10
  • § Canada Consumer Price Index in May is forecast to gain 0.2%
  • § US Pending Home Sales in May is forecast to gain 0.8%

Equity Markets:                                              

US equities were positive on Tuesday with the S&P500 trading up 1.29% and the DJIA up 1.21%. The European bourses were also positive with the FTSE trading up 0.78%, the DAX up 0.88% and the CAC up 1.46%. The NIKKEI and the HSI at the time of writing are trading up 1.22% and 0.32% respectively.

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