EU Morning Report

Focus turns to the Federal Reserve monetary policy decision

  • The US dollar edged lower against high yielding currencies during the US session as risk appetite stayed supported. Focus turns to the Federal Reserve monetary policy decision announced today at 18:15 GMT and investors are expecting to see if FOMC policymakers will announce a policy called Operation Twist. With this policy, the Fed would replace short-term debt with longer debt bonds resulting in lower long-term interest rates. Against the Swiss franc, the dollar edged higher to 0.8987 from 0.8790 on talks the Swiss National Bank lifted its EURCHF target to 1.25 francs from 1.20. Against the Japanese yen, the dollar fell close to a record low at 76.11 yesterday but later the pair recovered to 76.82 as investors were wary of the risk of intervention by the Bank of Japan.  
  • The euro ticked higher against its major counterparts ahead of the US Federal Reserve Interest Rate decision today. Asian equities turned positive as investors are expecting the Fed to announce new measures to boost the US economy. Greece promised to apply further austerity measures to the public sector expressing confidence that the country will receive the next tranche of financial aid. Against the US dollar, the euro hit 1.3743 from 1.3593. Versus the Swiss franc, the euro rose to 1.2329 from 1.2048.
  • The Australian dollar rose against the dollar on an improved risk appetite. The pair jumped to 1.0311 from 1.0169. The British Pound also rebounded trading off an eight month low versus the greenback as investors' attention shifts to the Bank of England meeting minutes. The pair hit 1.5746 from 1.5657. 
  • Oil prices ticked higher to 87.65 dollars a barrel from 85.50. Gold rose to 1815.10 dollars an ounce from 1769.51. Silver also edged higher to 40.28 dollars an ounce from 39.13.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.3750 with a preference to enter Short positions at 1.3740
  • § The USDJPY pivot point is at 76.55 with a preference to enter Short positions at 76.50
  • § The OIL pivot point is at 85.75 with a preference to enter Long positions at 85.75
  • § The Gold pivot point is at 1795 with a preference to enter Long positions at 1795                           

Today's calendar and market movers:

  • § UK Public Sector Net Borrowing in August is forecast to rise to 11.25B
  • § Canada Consumer Price Index in August is forecast to gain 0.1%
  • § US Existing Home Sales Change in August is forecast to rise to 4.71M
  • § US Fed Interest Rate Decision is forecast to keep rates unchanged at 0.25%

Equity Markets:                                                

US equities were mixed on Tuesday with the S&P500 trading down -0.17% and the DJIA up 0.07%. The European bourses were positive with the FTSE trading up 1.98%, the DAX up 2.88% and the CAC up 1.50%. The NIKKEI and the HSI at the time of writing are trading up 0.37% and down -0.26% respectively.

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