EU Morning Report

Euro falls weighed by a heightened risk aversion

  • World equities, as well as, risk appetite plummeted on Tuesday after news revealed that the Libya unrest spread to Iran. Investors fear that the political uncertainty might spread to Saudi Arabia and this can have a great impact on the global recovery as it is the world's largest oil exporter. Risk appetite was also hit by Ben Bernanke's speech saying that if oil and commodity prices continue to rise that could hurt the US economy. The euro slid against the stronger dollar today. The euro is trading below the 1.38 level falling as low as 1.3741 versus the dollar from 1.3853 traded yesterday. Investors expect Europe's Producer Price Index to be released later today.
  • The US dollar rose against a basket of currencies today supported by a heightened risk aversion in the market. The Fed Chairman Ben Bernanke was optimistic during his speech yesterday saying that the US economy is recovering despite unemployment being stubbornly high. He also said that the Fed will exit its Quantitative Easing program once there are signs of a self sustainable recovery and an improvement in the employment sector. Focus now turns to today's ADP employment change data from the US hoping that this will be an indication of Friday's Non Farm Payrolls figures.
  • The Australian dollar tumbled against the greenback today shedding more than 1 percent and falling to 1.0083. Aussie's neighbor, the Kiwi fell dramatically after the country's Prime Minister said that interest rates must be cut. Against the dollar, the New Zealand dollar fell to a two month low today at 0.7382 from 0.7528 traded yesterday.
  • The US dollar rebounds against the Canadian dollar climbing as high as 0.9756 recovering from a three year low at 0.9682. The Canadian dollar is also weighed by the Bank of Canada's decision to keep the country's interest rates at 1% and gave no indication of higher rates any time soon. Against the Japanese Yen, the dollar edged higher rising to 81.95 from 81.77 traded yesterday. 
  • Oil prices rally as antigovernment protests spread to Iran and the Libya unrest continues.  Oil jumped as high as 103.39 dollars a barrel. Gold prices rallied rising to 1434.60 dollars an ounce from 1409.09.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3825 with a preference to enter into Short positions at 1.3815
  • § The USDJPY pivot point is at 82.10 with a preference to enter Short positions at 82.05           

Today's calendar and market movers:

  • § Europe Producer Price Index in January is forecasted gain to 1.1%
  • § US ADP Employment Change in February is forecasted to fall to 184K 

Equity Markets:

US equities were negative on Tuesday with the S&P500 trading down -1.57% and the DJIA trading down -1.38%. The European bourses are negative with the FTSE trading down -0.97%, the DAX down -0.67% and the CAC down -1.05%. The NIKKEI and the HSI at the time of writing are trading down -2.43% and down -1.77% respectively.

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