EU Morning Report

Euro plummets after disappointing ADP employment data

  • The euro plummeted yesterday weighed by a heightened risk aversion in the market. Credit rating agency Moody's downgraded Greece by three notches and economic data from the US raised fears about the global economy. World equities plunged and demand for riskier currencies started to fade. Further weighing on the single currency was lower than expected Manufacturing Purchasing Manager Index. Against the dollar, the euro slid to 1.4307 from 1.4458 and the pair was last trading at 1.4372.
  • The  US dollar rose against high yielding currencies such as the euro and the Aussie but fell against the safe haven Swiss franc and the Japanese yen. ADP Employment Change revealed that 38 thousand new jobs were added in the US private job market in May, which is significantly less than the 178 thousand expected. The disappointing ADP data fuelled expectations that Friday's Non-farm Payrolls (NFP) figures will also drop raising concerns over the US economic recovery. Friday's NFP is the most important economic indicator of the month as it expresses the paid jobs added or lost in the US economy excluding the farm sector. NFP data is highly significant as it provides insights into the country's Labor sector and reflects the health of the economy. Focus turns to today's Initial Jobless Claims and Factory Orders.
  • Versus the Swiss franc, the dollar dipped near a record low at 0.8382 from 0.8542 as the poor employment data spurred higher demand for safe haven bets. Against the Japanese yen, the dollar dipped to 80.66 from 81.50 after the data.
  • The Australian dollar shed 1.5% sliding to 1.0586 against the dollar from 1.0752. Today, data showed Australia's Retail Sales rose more than expected in April but failed to support the Aussie.
  • Oil prices ticked lower at 99.29 dollars a barrel from 103.29. Gold fell to 1535.08 dollars an ounce from 1550.24. Silver also edged lower at 36.34 dollars an ounce from 38.42.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4390 with a preference to enter Short positions at 1.4380
  • § The USDJPY pivot point is at 81.30 with a preference to enter Short positions at 81.25
  • § The OIL pivot point is at 101.45 with a preference to enter Short positions at 101.45
  • § The Gold pivot point is at 1529 with a preference to enter Long positions at 1529                         

Today's calendar and market movers:

  • § US Initial Jobless Claims is forecast to fall to 415K
  • § US Factory Orders in April is forecast to fall 1%

Equity Markets:                                            

US equities were negative on Wednesday with the S&P500 trading down -2.28% and the DJIA down -2.22%. The European bourses were also negative with the FTSE trading down -1.02%, the DAX down -1.05% and the CAC down -1.05%. The NIKKEI and the HSI at the time of writing are trading down -1.69% and -1.74% respectively.

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