EU Morning Report

Focus turns to the ECB and BoE interest rate decisions

  • The euro rose against the dollar yesterday trading near a 17-month high and closer to the 1.50 level. Today, the euro edged higher ahead of the European Central Bank interest rate decision. No interest rate hike is expected today and focus turns to the ECB President Jean-Claude Trichet's speech at 12:30GMT. Investors expect that Trichet will sound hawkish and they are waiting to see if the phrase strong vigilance will be mentioned fueling speculation for further rate hikes. Against the greenback, the euro rose to 1.4940 yesterday but then fell to 1.4806 during the US session and today the pair is at 1.4884.
  • The US dollar weakened yesterday hitting a three year low against a basket of currencies. Later in the US session the dollar recovered after poor ADP jobs data hurt investors' risk appetite. ADP employment data revealed a 179K jobs growth in April but it failed to meet expectations. The poor ADP jobs figures add further strength on the view that the Fed will continue keeping its policy loose for an extended period of time. Against the Japanese yen, the dollar plummeted today falling to 80.26 from 81.18.
  • The Australian dollar traded lower today weighed by lower than expected retail sales data. The Aussie continues to be under pressure while commodities continue to fall. Against the dollar, the Aussie dipped to 1.0693 from 1.0876 traded yesterday. Aussie's neighbor, the Kiwi ticked higher today after data revealed that the country's unemployment rate fell more than expected to 6.6% in the first quarter. Against the dollar, the New Zealand dollar rose to 0.7941 from yesterday's 0.7864. 
  • The sterling rose as high as 1.6573 versus the dollar from 1.6453 yesterday but then eased to trade at 1.6482. Today, the British pound continues to rise trading as high as 1.6543 ahead of today's Bank of England interest rate meeting. Investors are not expecting a change in interest rates at today's meeting as economic data such as Housing Prices continue to decline.
  • Oil prices fell to 108.09 dollars a barrel from 111.19. Gold plummeted to 1505.94 dollars an ounce from a 1543.10. Silver also shed 8% yesterday sliding to 38.80 dollars an ounce from 42.30   

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4810 with a preference to enter Long positions at 1.4820
  • § The USDJPY pivot point is at 80.95 with a preference to enter Short positions at 80.85             

Today's calendar and market movers:

  • § UK BoE Interest rate decision is forecasted to keep interest rates unchanged at 0.5%
  • § Europe ECB Interest rate decision is forecasted to keep interest rates unchanged at 1.25%
  • § US Initial Jobless Claims is forecasted to fall to 410K 

Equity Markets:                                                

US equities were negative on Wednesday with the S&P500 trading down -0.69% and the DJIA down -0.66%. The European bourses were also negative with the FTSE trading down -1.62%, the DAX down -1.69% and the CAC down -1.31 %. The NIKKEI and the HSI at the time of writing are trading up 1.57% and 0.02% respectively.

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