EU Morning Report


Greek default fears support the US dollar

  • The euro fell against its major counterparts yesterday on continued fears about the eurozone debt crisis. Eurozone finance ministers agreed that the next tranche of funding to Greece should wait until November while Eurogroup Chairman Juncker said that there is a discussion about the private sector's involvement in a second rescue for Greece. The single currency is also weighted by speculation the European Central Bank may cut interest rates later this week. Versus the US dollar, the single currency plunged to a 9-month low, to 1.3163 from 1.3381. Against the Japanese yen, the euro dropped to a decade low at 100.75 from 103.23, as risk aversion dominated trades. The speech of the ECB President Jean Claude-Trichet is expected later today. Focus turns to the eurozone Producer Price Index at 09:00 GMT.  

  • The US dollar benefited against a basket of currencies supported by a heightened risk aversion in the market and better than expected US economic data. ISM Manufacturing PMI came out at 51.6, while it was expected to be 50.5. Against the Swiss franc, the US dollar rose to 0.9217 from 0.9077. Against the Japanese yen, the greenback fell to 76.50 from 77.26. Fed Chairman Bernanke is expected to testify before the JEC and clues regarding future monetary policy are awaited.

  • The Australian dollar recorded a fresh one year low against the US dollar at 0.9454. The Reserve Bank of Australia announced that interest rates are kept unchanged at 4.75% expressing fears for a global economic slowdown. The British pound also slid against the dollar and traded as low as 1.5420 from 1.5590.

  • Oil prices dropped further to 75.80 dollars a barrel from 79.60. Gold rose higher to 1672.03 dollars an ounce from 1621.90. Silver also ticked higher yesterday to 31.38 dollars an ounce from 29.7744.

Currencies to watch out for: EURUSD & USDJPY  

§  The EURUSD pivot point is at 1.3300 with a preference to enter Short positions at 1.3290

§  The USDJPY pivot point is at 76.90 with a preference to enter Short positions at 76.90

§  The OIL pivot point is at 78.65 with a preference to enter Short positions at 78.65

§  The Gold pivot point is at 1635 with a preference to enter Long positions at 1635


Today’s calendar and market movers:

§  UK Construction PMI in September is forecast to fall to 51.5

§  Europe Producer Price Index in September is forecast to fall -0.2%

§  US Factory Orders change in September is forecast to gain 0.2%


Equity Markets:


The European bourses were negative with the FTSE trading down -1.03%, the DAX down -2.28% and the CAC down -1.85%. US equities were mixed with the S&P500 trading down -2.85% and the DJIA down -2.36. The NIKKEI and the HSI at the time of writing are trading down -0.96% and -0.36% respectively.


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