EU Morning Report

Euro plummets after Trichet's press conference

  • The euro plummeted yesterday after the ECB Interest Rate meeting. No change in the monetary policy was announced and the focus turned to the ECB President Jean-Claude Trichet's press conference. Trichet followed a hawkish rhetoric and used phrases such as strong vigilance and price stability signaling that rates may rise as soon as next month. Despite his hawkish stance, the euro failed to find support and fell sharply below the 1.45 level versus the dollar showing that expectations for a rate hike were already priced in. It appears that investors' fears about Greece's escalating debt problems continue to put the single currency under pressure. Against the dollar, the euro dipped to 1.4468 from 1.4653.
  • The US dollar strengthened against a basket of currencies on higher demand for the safe haven currency. Initial Jobless Claims showed higher than expected figures while trade balance narrowed in April. Against the Japanese yen, the dollar rose to 80.46 from 79.83.
  • Sterling dropped after the Bank of England monetary policy meeting. BoE left interest rates unchanged at 0.5% and the asset purchase program unchanged. Minutes from the meeting will be released on June 22. With the most hawkish member Andrew Sentence now replaced, speculators expect the vote to be split to 7-2. The BoE is trying to find a healthy balance between rising prices and a sluggish economic growth. The rule is simple when inflation is rising then interest rates must go up. But can the UK economy handle an increase in rates while it still struggles to escape recession? Those questions the BoE is asked to answer making the timing for monetary tightening more difficult to speculate. Against the dollar, sterling fell to 1.6288 from 1.6465.
  • Oil prices rose to 102.42 dollars a barrel from 100.59. Gold edged higher to 1549.44 dollars an ounce from 1533.14. Silver also edged higher at 37.84 dollars an ounce from 36.55.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4550 with a preference to enter Short positions at 1.4540
  • § The USDJPY pivot point is at 79.85 with a preference to enter Long positions at 79.90
  • § The OIL pivot point is at 100.45 with a preference to enter Long positions at 100.45
  • § The Gold pivot point is at 1536 with a preference to enter Long positions at 1536                     

Today's calendar and market movers:

  • § UK Manufacturing Production in April is forecast to fall 0.1%
  • § UK Industrial Production in April is forecast to gain 0.1%
  • § Canada Net Change in Employment in May is forecast to rise to 20K

Equity Markets:                                             

US equities were positive on Thursday with the S&P500 trading up 0.74% and the DJIA up 0.63%. The European bourses were also positive with the FTSE trading up 0.82%, the DAX up 1.41% and the CAC up 1.06%. The NIKKEI and the HSI at the time of writing are trading up 0.55% and down -0.69% respectively.

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