EU Morning Report

Euro rallies as risk appetite begins to heal

  • The euro rallied against the dollar after the G-7 Finance ministers agreed on a joint intervention in order to stabilize the currency markets. Last week, the G-7 leaders agreed to join forces to support Japan by selling the yen as a strong yen may stall the country's recovery. After the G-7 calmed the markets, world equities rose and risk appetite began to stabilize. Risk appetite is also supported by a cease-fire announcement from Libya but the situation in the region remains fragile. The euro jumped to 1.4198 versus the dollar from 1.4003 traded on Friday. Focus turns to the ECB President Jean Claude Trichet speech due later today.
  • After the US signaled that Japan is recovering from the nuclear thread, the Japanese yen is on the defensive. Against the Japanese Yen, the US dollar eased to 80.50 from 81.98 but investors remain cautious as the prospect of another G-7 intervention still exists. The intervention came after the yen soared to record high levels on speculation the Japanese will liquidate their assets and repatriate their funds for reconstruction.
  • The US dollar dropped against a basket of currencies as risk appetite begins to heal. US Existing Home Sales data due at 14:00 GMT is expected to disappoint investors by showing a significant decline of 4.9%.
  • The Australian dollar rose against the greenback breaking above parity to trade as high as 1.0028. Sterling also traded higher climbing to 1.6256 dollars from 1.6060 traded on Friday. The Kiwi advanced against the dollar edging as high as 0.7343. 
  • Oil prices rose supported by the geopolitical uncertainty in Libya. Oil jumped to 103.26 dollars a barrel and gold rose to 1429.31 dollars an ounce.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.4100 with a preference to enter into Long positions at 1.4110
  • § The USDJPY pivot point is at 81.30 with a preference to enter Short positions at 81.25              

Today's calendar and market movers:

  • § US Existing Home Sales in February is forecasted to fall 4.9%

Equity Markets: 

US equities were positive on Friday with the S&P500 trading up 0.43% and the DJIA trading up 0.71%. The European bourses are also positive with the FTSE trading up 0.39%, the DAX up 0.11% and the CAC up 0.63%. The NIKKEI and the HSI at the time of writing are trading up 2.72% and up 1.20% respectively. 

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