EU Morning Report

Euro continues to fall as the euro zone debt crisis deepens

  • The euro plummeted yesterday weighed by the sovereign debt problems in the euro zone. Speculation that Greece may have to restructure its debt as early as this summer increased creating contagion fears for the euro zone periphery. Against the dollar, the euro broke below the 1.42 level falling as low as 1.4156 from 1.4404. Investors' focus turns to today's Purchasing Manager Index data released later today.
  • Risk appetite suffered a deeper hit yesterday after rating agency Standard & Poor's downgraded its outlook on the US debt. S&P said that the AAA rating may be downgraded in two years' time if decisive measures to reduce the country's fiscal deficit are not taken. As S&P's decision is digested, the US dollar edges higher against a basket of currencies. Against the safe haven Swiss franc, the dollar rose to 0.8999 from as low as 0.8905. Investors are expecting today's Housing Starts data released at 12:30 GMT.
  • Against the Japanese Yen, the dollar continues to underperform falling as low as 82.18 from 83.11. The euro also plummeted falling to 116.47 from 119.45.  
  • The Australian dollar edged lower against the greenback following the Reserve Bank of Australia's April minutes. The minutes revealed that RBA has no intention of hiking interest rates in the near term and warned of a possible slowdown due to the strong Australian dollar. The Aussie dipped to 1.0442 from 1.0572. Against the dollar, the Kiwi slid to 0.7826 from 0.7956 weighed by yesterday's poor inflation figures and a high risk aversion.
  • Oil prices ticked lower at 107.01 dollars a barrel from 109.19. Gold rose to a fresh record high at 1497.65 dollars an ounce from 1477.35. Silver rallied to 43.53 dollars an ounce from 42.18.

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4275 with a preference to enter Short positions at 1.4265
  • § The USDJPY pivot point is at 82.75 with a preference to enter Short positions at 82.70              

Today's calendar and market movers:

  • § Europe Purchasing Manager Index services in April is forecasted to fall to 56.9
  • § Europe Purchasing Manager Index Manufacturing in April is forecasted to fall to 57
  • § Canada Consumer Price Index in March is forecasted to gain 0.6%
  • § US Housing Starts in March is forecasted to rise to 520K

Equity Markets:                                               

US equities were negative on Monday with the S&P500 trading down -1.1% and the DJIA trading down -1.14%. The European bourses were also negative with the FTSE trading down -2.1%, the DAX down -2.11% and the CAC down -2.35%. The NIKKEI and the HSI at the time of writing are trading down -1.1% and -1.28% respectively.

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