EU Morning Report

Euro remains firm on expectations for an interest rate hike

  • The euro rallied after the second phase of the austerity vote in Greece was completed and the Greek parliament voted in favor of the legislation for the implementation of the new austerity plan. The five-year 78 billion euro austerity plan includes further tax hikes and deep spending cuts agreed by the EU and the IMF which secures a second round of financial aid for the country. The single currency is also supported by interest rate hike expectations as hawkish comments by ECB policymakers signaled that a rate hike will be decided at the European Central Bank Interest Rate meeting on Thursday. Consumer Price Index showed that inflation remains elevated gaining 2.7% in June, which is a well above target figure. Against the dollar, the euro climbed as high as 1.4545 from 1.4447.
  • The US dollar weakened against high yielding currencies such as the euro and the Aussie on an improved risk appetite in the market. World equities turned positive today as fears of a Greek default start to fade. Focus turns to the US Consumer Sentiment and ISM Manufacturing data expected later today. Against the safe haven Swiss franc, the greenback gained 1.9% rising to 0.8463 from 0.8305. Against the Japanese yen, the dollar also rose edging as high as 80.87 from 80.26.
  • The Australian dollar softened today against the greenback weighed by weaker than expected Manufacturing PMI data from China. The pair stepped off a three-week high at 1.0750 to trade at 1.0673. Sterling plummeted yesterday after data revealed that consumer confidence dropped by more than expected in June. The British pound remains under pressure after the Bank of England kept alive the prospect of additional quantitative easing. Against the greenback sterling dipped to 1.5972 from 1.6118.
  • Oil prices fell to 93.88 dollars a barrel from 95.79. Gold rose to 1497.37 dollars an ounce from 1514.12. Silver also ticked lower at 34.42 dollars an ounce from 35.11.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4450 with a preference to enter Long positions at 1.4460
  • § The USDJPY pivot point is at 80.40 with a preference to enter Long positions at 80.40
  • § The OIL pivot point is at 93.90 with a preference to enter Long positions at 93.90
  • § The Gold pivot point is at 1505 with a preference to enter Short positions at 1505                         

Today's calendar and market movers:

  • § Europe Purchasing Manager Index Manufacturing in June is forecast to fall to 52
  • § Europe Unemployment Rate in May is forecast to remain unchanged at 9.9%
  • § US Consumer Sentiment Index in June is forecast to rise to 71.9
  • § US ISM Manufacturing in June is forecast to fall to 51.8

Equity Markets:                                          

US equities were positive on Thursday with the S&P500 trading up 1.01% and the DJIA up 1.25%. The European bourses were also positive with the FTSE trading up 1.53%, the DAX up 1.13% and the CAC up 1.48%. The NIKKEI and the HSI at the time of writing are trading up 0.53% and 1.53% respectively.

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