EU Morning Report

Focus turns to the FOMC and Bank of England minutes

  • The euro edged higher yesterday recovering some of its losses to trade above the 1.42 level against the dollar. The single currency jumped to 1.4286 against a softer dollar from 1.4120 but remains vulnerable to euro zone debt problems. EU finance ministers failed to decide how to tackle Greece's debt crisis at the end of yesterday's meeting. Economic sentiment in the euro zone showed a lower than expected figure in May falling to 13.6 from a previous 19.7.
  • The US dollar weakened against a basket of currencies during yesterday's US session after disappointing US economic data. Housing Starts, Building Permits and Industrial Production missed expectations. World equities plunged and risk aversion rose on concerns over the US economic recovery. Focus turns to the FOMC minutes released today at 18 GMT. Against the Swiss franc, the greenback fell as low as 0.8784 from 0.8882. Against the Japanese yen, the dollar dropped at 80.97 from 81.76.
  • The Australian dollar rose against the dollar supported by interest rate hike expectations. The central bank sounded positive regarding the country's economic growth in the previous policy meeting minutes and said that higher interest rates may be needed in order to stop prices from rising. The Aussie rose as high as 1.0665 versus the dollar from 1.0505. Aussie's neighbor, the Kiwi, rallied to 0.7910 from 0.7763.
  • Sterling got a boost yesterday after Consumer Price Index data revealed significantly higher than expected figures. The data revealed that inflation gained 1% in April while the market was expecting a 0.7% gain adding more pressure to the Bank of England to normalize its monetary policy. After the CPI numbers, sterling jumped as high as 1.6517 versus the dollar but during the US session the pair surrendered its gains falling to 1.6146. Today, minutes from the Bank of England policy meeting will be released at 8:30 GMT showing how the MPC policymakers split when voting for their monetary policy.
  • Oil prices ticked higher today rising to 98.02 dollars a barrel from 95.00. Gold slid to 1471.75 dollars an ounce from 1497.50 but then recovered its losses to trade at 1492.57. Silver edged higher at 34.46 dollars an ounce from 32.98

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4190 with a preference to enter Long positions at 1.4200
  • § The USDJPY pivot point is at 81.50 with a preference to enter Short positions at 81.45              

Today's calendar and market movers:

  • § UK Unemployment Rate in March is forecasted to remain unchanged at 7.8%
  • § Canada Leading Indicators in April is forecasted to gain 0.6%

Equity Markets:                                                

US equities were negative on Tuesday with the S&P500 trading down -0.04% and the DJIA down -0.55%. The European bourses were also negative with the FTSE trading down -1.06%, the DAX down -1.77% and the CAC down -1.21%. The NIKKEI and the HSI at the time of writing are trading up 1.09% and 0.62% respectively.

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