EU Morning Report

Euro falls before the ECB Interest Rate Decision

  • The euro rallied against the dollar on Wednesday ahead of the European Central Bank (ECB) interest rate meeting due today at 11:45 GMT. Investors are expecting that the ECB will raise its lending rate by 25 bps in an effort to fight inflation. How the market will react will depend on ECB President's words during his Press Conference. The question remains whether he will signal further monetary tightening, which may support the euro and send it to fresh highs. The euro broke above the 1.43 level yesterday and jumped to a 14 month high at 1.4347. Later, the pair surrendered some of its gains on the news that Portugal formally requested financial help from the European Union. The pair fell to 1.4296 and was last trading at 1.4307.
  • The US dollar appears weaker against its major counterparts. Against the Swiss franc, the dollar plummeted to 0.9131 from 0.9295 after stronger inflation data from Switzerland. The Bank of Japan decided to keep interest rates unchanged near zero levels and signaled further easing measures in order to help the country recover from its crisis. Against the Japanese Yen, the dollar is trading within a tight range around 85.30 and the pair was last trading at 85.25.
  • The Australian dollar rose against the dollar after higher than expected data revealed that the economy added 37.8K new jobs in March. Against the dollar, the Aussie rose to a 29 year high at 1.0481 from 1.0328 traded yesterday.  
  • Sterling rallied against the greenback yesterday ahead of the Bank of England Interest Rate due today at 11 GMT. Investors expect that no change will be made to the monetary policy and interest rates will be kept on hold at 0.5%. The pair edged as high as 1.6362 but later fell to 1.6262 weighed by worse than expected Industrial Production figures.  
  • Oil prices remained elevated supported by the Libya unrest and rose to 109.12 dollars a barrel. Gold rose to 1461.98 dollars an ounce from as low as 1451.25.

Currency to watch out for: GBPUSD & USDJPY  

  • § The GBPUSD pivot point is at 1.6255 with a preference to enter Long positions at 1.6265
  • § The USDJPY pivot point is at 84.70 with a preference to enter Long positions at 84.75              

Today's calendar and market movers:

  • § Europe ECB Interest Rate Decision is forecasted to raise interest rates to 1.25%
  • § UK BoE Interest Rate Decision is forecasted to keep interest rates unchanged at 0.5%
  • § US Initial Jobless Claims is forecasted to fall to 385K 

Equity Markets: 

US equities were positive on Wednesday with the S&P500 trading up 0.22% and the DJIA trading up 0.27%. The European bourses are also positive with the FTSE trading up 0.57%, the DAX up 0.55% and the CAC up 0.16%. The NIKKEI and the HSI at the time of writing are trading up 0.15% and down -0.04% respectively.

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