EU Morning Report

Euro still above the 1.37 level ahead of the US GDP

  •  The euro continues to hover above the 1.37 level versus the dollar helped by growing optimism over the euro zone. Speculation that the ECB will lift interest rates before the Fed was reinforced after ECB Executive Board member Bini Smaghi expressed inflation fears. The single currency edged slightly lower today due to profit taking falling to 1.3695 dollars after it hit a high at 1.3757.  
  • The dollar is broadly softer today after US Jobless Claims and Durable Goods orders data disappointed investors with worse than expected figures. Data also showed Home Sales picking up in December but at a slow pace. The market focus turns to today's Gross Domestic Product which is expected to show an expansion in the US economy in the fourth quarter.
  •  Against the Japanese Yen, the US dollar rallied to 83.19 from 82.00 after ratings agency S&P downgraded Japan's credit rating by a notch. The Yen recovers some of its losses today to trade around 82.64 as Japan's bond market remains stable.
  •  The Australian dollar plummeted versus the dollar as hopes for an interest rate hike fade. The new tax added in order to rebuild the country after the damaging floods lessens the need for a rate hike weighing on the Aussie. The pair shed more than 1% on Thursday falling as low as 0.9873 well before parity level. Today the pair traded slightly higher and was last traded at 0.9899.
  •  The Sterling appears weaker on Friday after UK Consumer Confidence in January slid to its lowest in nearly two years. The British pound fell as low as 1.5878 versus the US dollar from 1.5989.
  •  Gold dropped nearly 3% on Thursday hitting a four month low weighed by a heightened risk appetite in the market. Sentiment on the euro zone recovering from a deep debt crisis is rising, as well as investors' positive outlook on the US recovery. Lower demand for safe haven assets hurts the precious metal which fell as low as 1308.03 dollars an ounce. 

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3635 with a preference to enter into Long positions at 1.3645
  • § The USDJPY pivot point is at 83.00 with a preference to enter Short positions at 82.95               

Today's calendar and market movers:

  • § US Gross Domestic Product Annualized in Q4 is forecasted to grow 3.5%
  • § US Gross Domestic Purchases Price Index in Q4 is forecasted to gain 1.7%
  • § US Consumer Sentiment Index in January is forecasted to fall to 73.1

Equity Markets:

US equities were positive on Thursday with the S&P500 trading up 0.22% and the DJIA trading up 0.04%. The European bourses are mixed with the FTSE trading down 0.07%, the DAX trading up 0.40% and the CAC up 0.26%. The NIKKEI and the HSI at the time of writing are trading down 1.08% and 0.40% respectively.

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