EU Morning Report

Euro is supported by optimism over the Greek austerity vote

  • The euro got a boost against its major counterparts yesterday after it was revealed that French banks have agreed to rollover Greek debt. ECB member Stark's hawkish comments further supported the single currency. He repeated the phrase 'strong vigilance' and also said that interest rates at 1.25% are not appropriate at this point signaling a possible rate hike. But the euro remains fragile ahead of the critical Greek Parliament's vote on the new austerity measures due tomorrow. The five-year austerity plan includes further tax hikes and deep spending cuts agreed by the EU and the IMF which will secure a second round of financial aid for Greece. Against the dollar, the euro gained 1.6% falling to 1.4329 from 1.4102. Against the Swiss franc, the euro reached 1.1956 from a record low at 1.1802. Investors' eyes turn to a speech by the European Central Bank President Jean-Claude Trichet expected at 18:45 GMT.
  • The US dollar is weaker against a basket of currencies today supported by optimism that the new austerity package will be approved by the Greek Parliament. Manufacturing Index and Consumer Confidence in June are expected today. Against the Japanese yen, the dollar rose to 80.72 from 80.97.
  • Sterling remains under pressure as investors' expectations for an interest rate hike start to fade. Recent economic data from the UK disappointed investors who were expecting a tightening of the monetary policy by the end of the year. Instead, the Bank of England policymakers emphasized on their concerns over the UK economic slowdown and said that additional quantitative easing may be needed. Focus turns to Gross Domestic Product in the first quarter which is expected to be confirmed at 0.5%. Versus the dollar, sterling hovers near a five-month low at 1.5913 and was last trading at 1.5958. 
  • Oil prices edged higher at 91.21 dollars a barrel from 89.60. Gold fell to 1490.60 dollars an ounce from 1505.19. Silver also ticked lower edging as low as 33.34 dollars an ounce from 34.14.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4235 with a preference to enter Long positions at 1.4235
  • § The USDJPY pivot point is at 80.65 with a preference to enter Long positions at 80.65
  • § The OIL pivot point is at 88.70 with a preference to enter Long positions at 88.70
  • § The Gold pivot point is at 1490 with a preference to enter Long positions at 1490                    

Today's calendar and market movers:

  • § UK Gross Domestic Product in Q1 is forecast to gain 0.5%
  • § US Manufacturing Index in June is forecast to rise to 2
  • § US Consumer Confidence in June is forecast to fall to 60.5

Equity Markets:                                              

US equities were positive on Monday with the S&P500 trading up 0.92% and the DJIA up 0.91%. The European bourses were mixed with the FTSE trading up 0.43%, the DAX down -0.19% and the CAC up 0.31%. The NIKKEI and the HSI at the time of writing are trading up 0.66% and down -0.03% respectively.

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