EU Morning Report

Euro gains as Italy's ratings get slashed

  • The euro produced a rally overnight against its major counterparts. Credit rating agency Moody's downgraded Italy's rating, however this failed to keep the euro down. Rumors of the Swiss National bank raising the 1.20 floor against the euro pushed it from 1.2126 to 1.2281 against the Swiss franc. Versus the US dollar, the single currency climbed to 1.3369 from 1.3145. Against the Japanese yen, the euro mounted to 102.78 from 100.78 as risk appetite appeared to drive trades.
  • The US dollar displayed mixed results against a basket of currencies after Fed Chairman Ben Bernanke stated that the US central bank is ready to take additional measures to strengthen the US economic recovery. Against the Swiss franc, the US dollar fell to 0.9145 from 0.9261. Against the Japanese yen, the greenback rose to 76.97 from 76.53, with the pair staying in a narrow range, threatened by Japanese intervention to weaken the Yen. Focus turns to the US ADP Employment Change expected later today.
  • The Australian dollar jumped supported by better than expected retail sales figures and climbed to 0.9596 from 0.9387 against the US dollar. The British pound also rose against the US dollar and traded as high as 1.5494 from 1.5339. The Bank of England interest rate meeting tomorrow is highly anticipated, with a lot of speculation around additional quantitative easing. The central bank can do that by buying financial assets in order to inject money into the economy. Eyes turn to the UK Final Gross Domestic Product for the second quarter expected at 08:30 GMT. 
  • Oil prices put a halt on sliding prices and rose to 78.31 dollars a barrel from 74.92. Gold declined to 1595.63 dollars an ounce from 1678.55. Silver also fell to 28.6238 dollars an ounce from 31.2988.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.3225 with a preference to enter Long positions at 1.3235
  • § The USDJPY pivot point is at 77.00 with a preference to enter Short positions at 76.95
  • § The OIL pivot point is at 75.00 with a preference to enter Long positions at 75.00
  • § The Gold pivot point is at 1595 with a preference to enter Long positions at 1595                           

Today's calendar and market movers:

  • § UK Services PMI in September is forecast to fall to 50.5
  • § UK Final Gross Domestic Product in Q2 is forecast to gain 0.2%
  • § Eurozone Gross Domestic Product is forecast to gain 0.2%
  • § US ADP Employment change in September is forecast to fall to 75K

Equity Markets:                                               

The European bourses were negative for yet another day with the FTSE trading down -2.58%, the DAX down -2.98% and the CAC down -2.61%. US equities were positive on Tuesday with the S&P500 trading up 2.25% and the DJIA 1.44%. The NIKKEI and the HSI at the time of writing are trading down -0.83% and -3.40% respectively.

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