EU Morning Report


Focus turns to the ECB and BoE Interest Rate Decisions

  • The euro plummeted yesterday after rating agency Moody's cut Portugal's sovereign rating by four notches to Ba2. Moody's explained the downgrade of Portugal's sovereign to a non-investment territory by emphasizing on the possibility the country will require a second round of financial bailout. The outlook on Portugal's rating remains negative raising fears that Portugal may follow Greece and fall in a deep debt crisis. Versus the greenback, the euro shed 1.3% falling to 1.4285 from 1.4466. Investors' focus turns to today's Interest Rate Decision by the European Central Bank due at 11:45 GMT. Rates are expected to rise by 25 bps as hawkish ECB policymakers said that 'strong vigilance is warranted' in order to maintain price stability. CPI reinforced expectations after it revealed that inflation remains elevated gaining 2.7% in June, which is a well above target figure. What is interesting to hear is what the ECB President Jean Claude Trichet has to say during the press conference that will follow.
  • The US dollar firmed against its major counterparts but fell versus the safe haven Swiss franc and Japanese Yen on heightened eurozone debt contagion fears. Focus turns to the ADP Employment Change Data as well as Initial Jobless Claims.
  • The Australian dollar advanced today after jobs data revealed significantly higher figures in June. Against the dollar, the Aussie rose to 1.0760 from 1.0654. Sterling slid against the dollar ahead of the Bank of England Interest Rate meeting today at 11 GMT. The prospect of additional quantitative easing is alive as the UK economy is struggling to escape recession. Sterling fell to 1.5944 dollars from 1.6090.
  • Oil prices fell to 95.88 dollars a barrel today from 97.77. Gold gained 1.6% edging higher to 1533.65 dollars an ounce from 1510.11. Silver gained 3.5% rising to 36.25 dollars an ounce from 35.03.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4350 with a preference to enter Short positions at 1.4340
  • § The USDJPY pivot point is at 81.10 with a preference to enter Short positions at 81.10
  • § The OIL pivot point is at 95.80 with a preference to enter Long positions at 95.80
  • § The Gold pivot point is at 1523 with a preference to enter Long positions at 1523                     

Today's calendar and market movers:

  • § Europe ECB Interest Rate Decision is expected to hike rates to 1.50%
  • § UK BoE Interest Rate Decision is forecast to keep rates unchanged at 0.5%
  • § US ADP Employment Change is forecast to rise to 68K
  • § US Initial Jobless Claims is forecast to fall to 421K

Equity Markets:                                           

US equities were positive on Wednesday with the S&P500 trading up 0.10% and the DJIA up 0.45%. The European bourses were negative with the FTSE trading down -0.35%, the DAX down -0.11% and the CAC down -0.44%. The NIKKEI and the HSI at the time of writing are trading down -0.11% and up 0.37% respectively.

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