EU Morning Report

Euro falls as risk sentiment plunges

  • The euro plummeted against the dollar weighted by a heightened risk aversion in the market. Asian equities fell while fighting continues in the Middle East. Another earthquake in Japan's already hurt north-east coast raised tsunami fears. Radiation concerns rise while workers resume a difficult battle to restore the nuclear plants' damaged cooling systems. EU debt problems also returned to haunt the euro after Standard and Poors downgraded Portugal's debt. Portugal's prime minister resigned after the country's parliament rejected his new fiscal austerity measures. The President's resignation increases pressure on Portugal to receive bailout, further deepening the uncertainty over the euro zone. Against the dollar the euro is still trading above the 1.40 level supported by expectations of an early interest rate hike. The pair dipped to 1.4019 from 1.4192 traded on Friday. The euro also fell against the sterling and the Aussie falling to 0.8731 and 1.3677 respectively. 
  • Against the Japanese Yen, the US dollar edged higher supported by concerns over the situation in Fukushima nuclear plant. The nuclear thread appears far from over and the pair climbed to 81.83 from 80.86 after it was trading in a tight range around 80.9 for four straight days. Investors appear cautious to push up the yen as the prospect of another G-7 intervention still exists.
  • The US dollar strengthened after Q4 Gross Domestic Product surprisingly showed the US economy grew 3.1%. Today we expect February's US Pending Home Sales to show a 0.9% gain up from the -2.8% decline in January.
  • The Australian dollar rallied against the greenback supported by higher commodity prices. The Aussie jumped as high as 1.0293 from 1.0187. The Kiwi also rose edging as high as 0.7574 from 0.7484.  
  • Oil prices remained elevated supported by Middle East worries trading around 105 dollars a barrel. Gold fell to 1422.22 dollars an ounce from 1437.79 weighed by a stronger US dollar.

Currency to watch out for: GBPUSD & USDJPY  

  • § The GBPUSD pivot point is at 1.6055 with a preference to enter Short positions at 1.6045
  • § The USDJPY pivot point is at 81.30 with a preference to enter Long positions at 81.35              

Today's calendar and market movers:

  • § US Pending Home Sales in February is forecasted to gain 0.9%
  • § US Personal Income in February is forecasted to gain 0.4%
  • § New Zealand Trade Balance in February is forecasted to rise to 272M

Equity Markets:

US equities were positive on Friday with the S&P500 trading up 0.32% and the DJIA trading up 0.41%. The European bourses are also positive with the FTSE trading up 0.34%, the DAX up 0.18% and the CAC up 0.09%. The NIKKEI and the HSI at the time of writing are trading down -0.98% and -0.72% respectively.

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