Euro falls weighed by euro zone debt fears

  • The euro plummeted on Monday as euro zone policymakers failed to come up with a concrete plan to solve the debt crisis. Further weighing on the single currency was a report revealing that the troubled German bank WestLB is struggling to find a bailout plan. Euro zone debt contagion fears are heightened as peripheral euro zone yield spreads jumped further pushing the euro under pressure. The euro fell against the dollar on Monday hitting a three-week low at 1.3427 from 1.3557. Today, the euro resumes its downward direction after Germany GDP in the fourth quarter disappointing the markets revealing that the economy grew 0.4% while investors were expecting a growth of 0.5%. The pair remains pressured under the 1.35 level and it was last traded at 1.3472. Focus now turns to euro zone Gross Domestic Product released later today  
  • The US dollar appears firmer today ahead of the US economic data released later today including Retail Sales and Manufacturing Index. Speculators are expecting the greenback to rise if data shows positive numbers that will add strength on the view that the US has entered a sustainable recovery phase.
  • Against the Japanese Yen, the dollar rose on Tuesday as high as 83.57 from 83.19. Today the Bank of Japan kept interest rates on hold at a range of 0 - 0.1% and also stated that the country is steadily escaping recession and there is no need for further monetary easing. 
  • The Australian dollar edged higher today after China's Consumer Price Index showed a lower than expected figure. Australia is China's largest trade partner, and a lower than expected inflation pushed the Aussie as high as 1.0057 versus the dollar from 1.0017. Later, the pair dropped at 1.0001 after the initial reaction to the data faded and investors became conscious of the existing upside inflation risk in China.
  • Gold ticked higher today supported by eased inflation fears in China. The precious metal rose as high as 1365.20 dollars an ounce from 1360.58.

 Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3465 with a preference to enter into Long positions at 1.3475
  • § The USDJPY pivot point is at 83.15 with a preference to enter Long positions at 83.20              

Today's calendar and market movers:

  • § UK Consumer Price Index in January is forecasted to gain 0.1%
  • § Europe Gross Domestic Product in Q4 is forecasted to gain 0.4%
  • § US Retail Sales in January is forecasted to gain 0.5% 

Equity Markets:

US equities were mixed on Monday with the S&P500 trading up 0.24% and the DJIA trading down -0.04%. The European bourses are also mixed with the FTSE trading down -0.05%, the DAX trading up 0.34% and the CAC down 0.11%. The NIKKEI and the HSI at the time of writing are trading up 0.12% and down 0.45% respectively.

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