EU Morning Report

Euro falls weighted by a heightened risk aversion

  • The euro plummeted yesterday after rating agency Moody's downgraded Spain's debt and warned of a further downgrade. The single currency weakened against a basket of currencies as euro zone debt contagion fears resurfaced. Attention now turns to the European leaders meeting at an EU Summit today to agree how to tackle the debt crisis. Against the dollar, the single currency broke below the 1.38 level falling as low as 1.3774 from 1.3912. The euro stepped off its four month high at 1.4035 after euro zone sovereign woes returned to haunt it. Investors now appear cautious to support the single currency as expectations of an early interest rate hike by the ECB fade.
  • As the euro falls, the US dollar appears stronger supported by a heightened risk aversion in the market. Yesterday, data revealed US Initial Claims to rise higher than the market expected. Eyes now turn to the US Retail Sales and Consume Sentiment Index due later today.
  • The Japanese Yen fell sharply against the dollar and the euro today after a massive earthquake hit Japan. The dollar rallied against the yen, extending gains for the firth straight day and rising as high as 83.28 from 82.76. The euro jumped as high as 115.01 yen from 114.18 traded yesterday.
  • Sterling extends its losses a day after the Bank of England Interest Rate decision. Policymakers decided to keep interest rates and the asset purchase program unchanged. Against the dollar, sterling dropped to 1.6037 from 1.6211 traded yesterday. Investors are now waiting the MPC minutes due later this month.
  • The Australian dollar resumes its downward trend against the greenback today weighed by poor employment data and a heightened risk aversion. The Aussie is also weighted by a report showing that inflation in China failed to ease in February. The Aussie broke below parity edging as low as 0.9972 dollars from 1.0117.
  • Oil prices edged lower to 100.59 dollars a barrel from 105.04.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3870 with a preference to enter into Short positions at 1.3860
  • § The USDJPY pivot point is at 82.80 with a preference to enter Long positions at 82.85              

Today's calendar and market movers:

  • § US Retail Sales in February is forecasted to gain 0.9%
  • § US Consumer Sentiment Index in March is forecasted to rise to 76.3

Equity Markets:

US equities were negative on Thursday with the S&P500 trading down -1.89% and the DJIA trading down -1.87%. The European bourses are also negative with the FTSE trading down -1.55%, the DAX down -0.96% and the CAC down -0.75%. The NIKKEI and the HSI at the time of writing are trading down -1.72% and down -1.21% respectively.

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