EU Morning Report

The euro slides on Greece's sovereign debt problems

  • The euro edged higher yesterday after the better-than-expected German IFO data. The German IFO Business confidence revealed a rise to 114.2 while the market expected a fall to 113.7. However, the euro's rise may be short-lived as Greece's sovereign problems escalate.    Yesterday, Greece's opposition leader Antonis Samaras rejected the country's new austerity plan knocking the euro lower. The Greek government agreed to accelerate a state asset-sale program by the end of next month in order to avoid default. Against the dollar, the euro traded as high as 1.4133 from 1.4013 but today the pair dipped to 1.4015.     
  • The US dollar strengthened against the high yielding currencies such as the euro and the dollar but fell against the safe haven Swiss franc. Risk aversion continues to support the greenback while the euro zone sovereign debt crisis deepens. Economic data revealed that US New Home Sales grew more than expected in April whereas Manufacturing showed weaker than expected figures. Focus turns to the US Durable Goods Orders which is expected to reveal softer figures for April.  Against the Swiss franc, the dollar fell to 0.8782 from 0.8886. Against the Japanese yen, the dollar climbed to 82.20 from 81.61.
  • The Australian dollar fell sharply today as growing concerns about the euro zone debt problems continue to support a risk aversive mood weighing on the Aussie. Against the dollar, the Aussie fell to a five-week low at 1.0440 from 1.0582.
  • Sterling rallied against the greenback yesterday rising to 1.6208 from 1.6068 and today the pair recovered some of its losses to trade at 1.6143. The Bank of England member Paul Fisher said that an interest rate hike would not be a wise decision at this point giver the recent weak economic data. He added that further stimulus may be needed in order to support the country's economic recovery. Investors' eyes turn to the UK Gross Domestic Product for the first quarter expected at 8:30 GMT.
  • Oil prices rose to 100.05 dollars a barrel today from 96.62, a rise of 3.5%. Gold also jumped to 1527.51 dollars an ounce from 1513.63. Silver gained 5% edging higher at 36.69 dollars an ounce from 34.91.  

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4085 with a preference to enter Short positions at 1.4075
  • § The USDJPY pivot point is at 81.60 with a preference to enter Long positions at 81.70

               

Today's calendar and market movers:

  • § UK Gross Domestic Product in Q1 is forecasted to gain 0.5%
  • § US Durable Goods Orders in April is forecasted to fall 2.2%

 

Equity Markets:

                                                

US equities were negative on Tuesday with the S&P500 trading down -0.08% and the DJIA down -0.2%. The European bourses were positive with the FTSE trading up 0.39%, the DAX up -0.41% and the CAC up 0.25%. The NIKKEI and the HSI at the time of writing are trading down -0.49% and -0.55% respectively.

 

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