EU Morning Report

Fears of a Greek default weigh on the single currency

  • The euro plummeted against its major counterparts as the risk of a Greek default and eurozone debt contagion increased. The IMF/World Bank weekend meetings disappointed the markets as no significant decision was taken towards a solution of the eurozone debt crisis.  Doubts that Greece will receive the next tranche of funding weighs on the single currency and focus now turns to the Eurogroup next meeting on October 3rd. Against the US dollar, the single currency dipped to an eight-month low at 1.3390 from 1.3580. Versus the Japanese yen, the euro shed 1.6% dropping to 102.18 from 103.82. Attention shifts to the IFO data from Germany. 
  • The US dollar continues to rise against a basket of currencies since the Fed's Operation Twist move. Escalating fears about the slow economic growth in the US as well as the future of the eurozone spurred heightened demand for the safe haven currency knocking high yielding currencies lower. Against the Japanese yen, the US dollar jumped to 76.88 from 76.14 but today the pair surrendered gains to trade as low as 76.22.
  • The Australian dollar slid to a ten-month low versus the dollar to as low as 0.9629 from 0.9862. Heightened risk aversion as well as lower commodity prices weighed on the Aussie as investors' demand for high yielding assets is dampened.
  • Oil prices shed 5.4% falling 77.34 dollars a barrel from 81.78 traded on Friday. Gold slid to 1567.92 dollars an ounce from 1755.13, a decline of 10.7%. Silver also edged lower to 26.05 dollars an ounce today from 39.59, a decline of 34.2%.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.3475 with a preference to enter Short positions at 1.3465
  • § The USDJPY pivot point is at 76.70 with a preference to enter Short positions at 76.65
  • § The OIL pivot point is at 80.85 with a preference to enter Short positions at 80.85
  • § The Gold pivot point is at 1645 with a preference to enter Short positions at 1645                          

Today's calendar and market movers:

  • § Germany IFO Business Climate in September is forecast to fall to 106.5
  • § Germany IFO Current Conditions in September is forecast to fall to 116.0
  • § Germany IFO Expectations in September is forecast to fall to 97.5
  • § US New Home Sales in August is forecast to fall 1.0% 

Equity Markets:                                                

US equities were positive on Friday with the S&P500 trading up 0.61% and the DJIA up 0.35%. The European bourses were also positive with the FTSE trading up 0.50%, the DAX up 0.63% and the CAC up 1.02%. The NIKKEI and the HSI at the time of writing are trading down -2.15% and -1.79% respectively. 

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