EU Morning Report

Euro falls as the market remembers the euro zone debt crisis

  • The euro plummeted yesterday as euro zone debt problems resurfaced. Rating agency Moody's cut Greece's debt by three notches and warned of a further downgrade. After the news, Greek, Spanish and Portuguese government bond yields jumped and euro zone debt contagion fears started to haunt the euro. Against the dollar, the single currency broke below the 1.39 level falling as low as 1.3861 from 1.3987. Today, the pair resumes its downward trend ahead of an EU summit on Friday, which is expected to unveil measures to tackle the euro zone debt crisis. It appears that rate expectations triggered last week by ECB President Jean Claude Trichet can not support the euro as euro zone debt jitters are now in the center of attention.
  • As the euro slides, the US dollar strengthened against a basket of currencies helped by an ease in oil prices. Against the Japanese Yen, the dollar gained ground extending gains for the third straight day. Today, the pair rose as high as 82.92 up from 81.94 traded on Monday. Against the Swiss franc, the dollar also rallied climbing as high as 0.9368 from 0.9263 traded yesterday. 
  • The Australian dollar slid against the greenback yesterday weighed by heightened risk aversion in the market. The Aussie is also weighted by a government report revealing that Home loans declined to their lowest yearly level. The Aussie tumbled to as low as 1.0052 dollars from 1.0133. The pair was last traded at 1.0082. Aussie's neighbor, the Kiwi, dipped to 0.7369 versus the greenback ahead of the Reserve Bank of New Zealand interest rate decision later today. Investors are expecting rates to be cut to 2.75% which may push the Kiwi to a lower ground.
  • Oil prices fell yesterday sliding as low as 103.33 dollars a barrel. Gold prices also fell weighed by the stronger dollar. The precious metal dipped to 1423.10 dollars an ounce from 1436.60.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3860 with a preference to enter into Long positions at 1.3870
  • § The USDJPY pivot point is at 82.60 with a preference to enter Long positions at 82.65             

Today's calendar and market movers:

  • § Germany Industrial Production in January is forecasted to gain 1.8%
  • § New Zealand Interest Rate Decision is forecasted to cut rates at 2.75%
  • § Japan Gross Domestic Product in Q4 is forecasted to fall 0.3%

Equity Markets:

US equities were positive on Tuesday with the S&P500 trading up 0.89% and the DJIA trading up 1.03%. The European bourses are also positive with the FTSE trading up 0.02%, the DAX up 0.04% and the CAC up 0.64%. The NIKKEI and the HSI at the time of writing are trading up 0.61% and up 0.58% respectively. 

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