EU Morning Report

The euro remains under pressure on higher risk aversion

  • The euro fell broadly weighed by Greek debt restructuring fears. Uncertainty over Greece's debt crisis deepened after IMF chief Dominique-Strauss Kahn was arrested on sexual assault charges. Strauss Kahn had planned to join the European finance ministers and the International Monetary Fund at today's meeting to discuss Portugal's rescue package and Greece's debt crisis. World equities plunged and risk aversion rose on the news, weighing on the single currency. On Friday, euro zone Gross Domestic Product revealed higher than expected figures in Q1 showing a 0.8% expansion. Against the dollar, the euro shed 2% falling to a seven-week low at 1.4047 from 1.4339.
  • The US dollar strengthened against a basket of currencies as heightened risk aversion prompted an increased demand for the safe currency. US Consumer Price Index showed a 0.4% in April in line with expectations and Consumer Sentiment Index rose in May. Against the Swiss franc, the greenback got a boost on Friday jumping to a three week-high at 0.8945 from 0.8797. Against the Japanese yen, the dollar climbed to 81.06 from 80.33.
  • The Australian dollar slid against the dollar weighed by falling commodity prices and a lower demand for risk. Last week's disappointing employment data added further pressure on the Aussie as expectations for an interest rate hike started to fade. Against the dollar, the Aussie dipped to 1.0520 from 1.0715.
  • Sterling also dipped against a firmer greenback falling to 1.6146 from 1.6308. The pound remains under pressure after the Bank of England lowered its growth forecast pushing back expectations for an interest rate hike.
  • Oil prices ticked lower falling to 97.08 dollars a barrel from 100.67. Gold slid to 1482.79 dollars an ounce from 1516.34. Silver edged lower at 33.92 dollars an ounce from 36.44

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4170 with a preference to enter Short positions at 1.4160
  • § The USDJPY pivot point is at 81.10 with a preference to enter Short positions at 81.05            

Today's calendar and market movers:

  • § Europe Consumer Price Index in April is forecasted to gain 0.6%
  • § Europe Trade Balance in March is forecasted to fall to 1.5B
  • § US NY Empire State Manufacturing Index in May is forecasted to fall to 20 

Equity Markets:                                                

US equities were negative on Friday with the S&P500 trading down -0.81% and the DJIA down -0.79%. The European bourses were also negative with the FTSE trading down -0.32%, the DAX down -0.55% and the CAC down -0.11%. The NIKKEI and the HSI at the time of writing are trading down -1.81% and -1.19% respectively.

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