EU Morning Report

Euro rallies after the EU summit

  • The euro rallied against its major counterparts after the European Union summit eased eurozone debt contagion fears. EU leaders agreed on a package on Greece under which Greek debt is exchanged for new bonds of a longer maturity with low interest rates. The deal also ensures that Greek banks will avoid fallout by providing liquidity from the European Central Bank. World equities rose and risk appetite heightened pushing up demand for high yielding assets.  Against the dollar, the single currency jumped to a two week high at 1.4437 from 1.4138. Versus the safe haven Swiss franc, the euro climbed as high as 1.1950 recovering from 1.1609. Focus now turns to Industrial New Orders data from Europe at 9:00 GMT.
  • The US dollar remains under pressure as the debt ceiling problem still remains a concern. The US risks of losing its AAA rating if a plan is not decided before the August 2 deadline. Initial Jobless Claims unexpectedly rose to 418K weighing on the greenback. Against the Japanese yen, the dollar dipped to 78.22 from 79.02.
  • Sterling rose yesterday as the EU summit results raised optimism that the euro area will overcome its debt crisis. Retail Sales gained 0.7% in June after a contraction of 1.3% the previous month. Against the greenback, sterling climbed to a five week high at 1.6341 from 1.6120.
  • The Australian dollar rallied after a report showed Export and Import prices rose more than expected in the second quarter. Speculation that the Reserve Bank of Australia will cut interest rates to boost growth starts to fade and against the dollar, the Aussie hit a two and a half months high at 1.0856 from 1.0693.
  • Oil prices rose to 100.14 dollars a barrel today from 97.19. Gold edged lower to 1584.33 dollars an ounce from 1604.27. Silver also ticked lower to 38.82 dollars an ounce from 40.33.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4270 with a preference to enter Long positions at 1.4280
  • § The USDJPY pivot point is at 78.90 with a preference to enter Short positions at 78.80
  • § The OIL pivot point is at 98.65 with a preference to enter Long positions at 98.65
  • § The Gold pivot point is at 1605 with a preference to enter Short positions at 1605                          

Today's calendar and market movers:

  • § Europe Industrial New Orders in May is forecast to gain 0.6%
  • § Canada Consumer Price Index in June is forecast to fall by 0.2%

Equity Markets:                                             

US equities were positive on Thursday with the S&P500 trading up 1.35% and the DJIA up 1.21%. The European bourses were also positive with the FTSE trading up 0.79%, the DAX up 0.95% and the CAC up 1.66%. The NIKKEI and the HSI at the time of writing are trading up 1.16% and 1.69% respectively.

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