EU Morning Report

Euro falls on heightened eurozone debt contagion fears

  • The US dollar advanced against its major counterparts as risk appetite in the market plummeted and world equities turned negative. Disappointing US data spurred growing concerns about the global economic growth sending gold prices to a fresh record high. US Manufacturing Index and Existing Home Sales surprised the markets by showing significantly lower than expected figures. In addition, Consumer Price Index gained 0.5% in July higher than the 0.2% expected. The US economy faces the risk of falling back into recession, battling with slow growth, high inflation and rising debt levels. Against the Japanese yen, the dollar rallied to 76.96 from 76.44 but later it surrendered its gains to trade at 76.45.
  • The euro edged lower against a basket of currencies on heightened concerns that the eurozone debt crisis could spread to the whole financial system. Investors fear that the European Banks will have to face funding problems as uncertainty about the stability of the banking system reduces banks' ability to borrow. Against the greenback, the euro dipped to 1.4271 from 1.4451. Versus the Swiss franc, the single currency dipped to 1.1240 from 1.1515.
  • The Australian dollar shed 2.3% against the greenback falling to 1.0315 from 1.0555. Investors' appetite for the high yielding currency is curbed by the losses in the stock market and fears for a slowing global economy. Further weighing on the Aussie is speculation that the Reserve Bank of Australia may need to cut interest rates.
  • Oil prices shed 8.2% falling to 80.29 dollars a barrel from 87.46. Gold edged higher to a fresh record high at 1853.55 dollars an ounce from 1785.81. Silver also ticked higher to 41.15 dollars an ounce from 40.03.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4350 with a preference to enter Short positions at 1.4340
  • § The USDJPY pivot point is at 77.00 with a preference to enter Short positions at 76.95
  • § The OIL pivot point is at 82.05 with a preference to enter Short positions at 82.05
  • § The Gold pivot point is at 1815 with a preference to enter Long positions at 1815                          

Today's calendar and market movers:

  • § UK Public Sector Net Borrowing in July is forecast to fall to 0.50B
  • § Canada Consumer Price Index in July is forecast to gain 0.2%

Equity Markets:                                                

US equities were negative on Thursday with the S&P500 trading down -4.46% and the DJIA down -3.68%. The European bourses were also negative with the FTSE trading down -4.49%, the DAX down -5.82% and the CAC down -5.48%. The NIKKEI and the HSI at the time of writing are trading down -2.1% and -2.38% respectively.

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