EU Morning Report

Euro falls as euro zone debt problems return

  • The euro fell against the dollar as euro zone debt problems resurfaced. Today, Portugal is expected to vote on new fiscal austerity measures in an effort to cut the country's budget deficit and avoid bailout. Further weighing on the euro are concerns about Ireland and Greece debt paying problems that pushed up yields on Irish and Greek debt. Asian equities plummeted as well as risk appetite as investors appear worried about Japan earthquake's serious impact on economy. Demand for riskier assets appears lower as fighting in Libya continues and the radiation risk in Japan is still high. Against the greenback, the euro dipped to 1.4152 from 1.4247 and the pair was last trading at 1.4172. 
  • Against the Japanese Yen, the US dollar is little changed trading in a tight range around 80.90. Investors appear cautious to push up the yen as the prospect of another G-7 intervention still exists. The intervention came after the yen soared to record high levels on speculation the Japanese will liquidate their assets and repatriate their funds for reconstruction.
  • The US dollar appears stronger against a basket of currencies supported by a heightened risk aversion. The Australian dollar fell against the greenback falling to 1.0063 from 1.0127 but then recovered some of its losses to trade at 1.0107. The New Zealand dollar dipped to 0.7373 versus the dollar from 0.7445.
  • Sterling is trading higher against the greenback ahead of the Bank of England minutes. UK Consumer Price Index surprised investors after it revealed a higher than expected figure. Rate hike expectations pushed the sterling higher to a 14 month high at 1.6399 dollars from 1.6291.
  • Oil prices remained elevated supported by Middle East worries and jumped to 105.34 dollars a barrel.

Currency to watch out for: EURUSD & USDJPY

  • § The GBPUSD pivot point is at 1.6290 with a preference to enter Long positions at 1.6300
  • § The USDJPY pivot point is at 81.40 with a preference to enter Short positions at 81.35              

Today's calendar and market movers:

  • § Europe Industrial New Orders in January is forecasted to gain 1.3%
  • § US New Home Sales in February is forecasted to gain 5.6%
  • § New Zealand Gross Domestic Product in Q4 is forecasted to gain 0.1%

Equity Markets: 

US equities were negative on Tuesday with the S&P500 trading down -0.15% and the DJIA trading down -0.36%. The European bourses are also negative with the FTSE trading down -0.4%, the DAX down -0.52% and the CAC down -0.3%. The NIKKEI and the HSI at the time of writing are trading down -1.65% and down -0.38% respectively.

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