EU Morning Report

Euro soars a day after the ECB Interest Rate Decision

The euro rallied a day after the European Central Bank (ECB) interest rate decision. The ECB decided to raise its lending rate by 25 bps to 1.25% in an effort to fight inflation. During his Press Conference, ECB President Jean Claude Trichet said that the central bank will continue to monitor very closely all the upside risks to inflation. Despite his hawkish stance he said that April's rate hike is not the start of a series of rate hikes. Against the dollar, the euro broke above the 1.44 level today and jumped to a 15 month high at 1.4403 from 1.4241. The single currency also rose against the Japanese Yen hitting an 11 month high at 122.63 from 120.75.

The US dollar appears weaker against its major counterparts weighed by fears of a US government shutdown. US President Barack Obama failed to agree on a budget deal with congressional leaders knocking the greenback lower. Against the Japanese Yen, the dollar fell after another massive earthquake hit northern Japan. The pair fell to 84.58 but then recovered to 85.37 after a report said that the Fukushima nuclear plant has not suffered serious damages. Against the Swiss franc, the dollar plummeted to 0.9102 from 0.9199.

The Australian dollar rose against the dollar supported by surging commodity prices. Against the dollar, the Aussie rose to a fresh 29 year high at 1.0533 from 1.0411 traded yesterday.  

Sterling rose against a weaker greenback today. On Thursday, the Bank of England decided to keep interest rates unchanged. The decision was as expected and investors speculate the first rate hike to occur in May. Focus now shifts to the BoE minutes released on 20 April. The pair edged as high as 1.6406 from 1.6262. 

Oil prices remained elevated supported by the Libya unrest and rose to a two and a half year high at 111.37 dollars a barrel. Gold rose to a record high at 1466.78 dollars an ounce from 1452.54. Silver also ticked higher to 40.12 dollars an ounce. 

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4325 with a preference to enter Long positions at 1.4335
  • § The USDJPY pivot point is at 85.50 with a preference to enter Short positions at 85.45            

Today's calendar and market movers:

  • § Germany Trade Balance in February is forecasted to rise to 14.2B
  • § Canada Unemployment Rate in March is forecasted to fall to 7.7%
  • § Canada Net Change in Employment in March is forecasted to rise to 32.4K

Equity Markets: 

US equities were negative on Thursday with the S&P500 trading down -0.15% and the DJIA trading down -0.14%. The European bourses are also negative with the FTSE trading down -0.56%, the DAX down -0.5% and the CAC down -0.49%. The NIKKEI and the HSI at the time of writing are trading up 2.18% and up 0.57% respectively.

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