EU Morning Report

Euro slips on heightened eurozone debt contagion fears

  • The US dollar continues to weaken against a basket of currencies as there is still no sign that US policymakers will reach an agreement on the US debt ceiling. Failure of raising the US debt ceiling by August 2 may result in the US defaulting on its debt obligations. Against the Japanese yen, the dollar dipped to a four month low at 77.45 from 78.02 traded yesterday as poor risk appetite spurs higher demand for the safe haven Japanese currency. The yen appreciated further after the Japanese Economics Minister said that an intervention in the currency markets is difficult raising speculation that there will be no action before the August 2 deadline. Versus the Swiss franc, the dollar continues to be under pressure trading near a record low at 0.7989. Yesterday, Initial Jobless Claims showed a drop to 398K while the market expected 412K. Focus now turns to the US Consumer Confidence Index.  
  • The euro shed 1% against the dollar dropping to as low as 1.4254 from 1.4400. Investors are still worried about a eurozone debt contagion and worries intensified after an Italian debt auction, which resulted in the highest borrowing costs in eleven years. Further weighing on the single currency is rating agency Moody's action to put Spain on review for a possible downgrade. Attention shifts to the eurozone Consumer Price Index data revealed today at 9 GMT.
  • The Australian dollar plummeted against the dollar on growing concerns over eurozone and US debt crisis. Against the greenback, the Aussie traded lower from a 28-year high at 1.1079 to 1.0946. Aussie's neighbor, the Kiwi, also fell against the greenback to 0.8649 from 0.8752.  
  • Oil prices ticked higher to 97.99 dollars a barrel from 96.18. Gold edged lower to 1602.82 dollars an ounce from 1620.10. Silver also ticked lower to 39.30 dollars an ounce from 40.55.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4250 with a preference to enter Long positions at 1.4260
  • § The USDJPY pivot point is at 77.90 with a preference to enter Short positions at 77.80
  • § The OIL pivot point is at 98.10 with a preference to enter Short positions at 98.10
  • § The Gold pivot point is at 1602 with a preference to enter Long positions at 1602                      

Today's calendar and market movers:

  • § Europe Consumer Price Index in July is forecast to gain 2.7%
  • § Canada Gross Domestic Product in Q2 is forecast to gain 0.1%
  • § US Consumer Sentiment Index in July is forecast to fall to 64.0

Equity Markets:                                              

US equities were negative on Thursday with the S&P500 trading down -0.32% and the DJIA down -0.51%. The European bourses were mixed with the FTSE trading up -0.28%, the DAX down -0.86% and the CAC down -0.57%. The NIKKEI and the HSI at the time of writing are trading down -0.60% and -0.73% respectively.

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