EU Morning Report

Higher risk sentiment weighs on the US dollar

  • The euro rallied against the greenback on higher demand for riskier assets. A successful Spanish bond auction eased investors' fears that Spain is also falling into the euro zone debt crisis. The euro broke above the 1.46 level versus the dollar rising to a 16 month high at 1.4617 from 1.4353.     
  • The US dollar plummeted against its major counterparts weighed by an improved risk appetite in the market. The dollar index slid to a three-year low today and heading towards an all-time low as investors are willing to sell the dollar for higher yielding currencies. Solid US corporate earnings reports boosted investors' confidence that the global economy is recovering. World equities soared and commodities jumped to record high levels. US data revealed that the existing home sales rose more than expected in March. Focus now turns to today's Initial Jobless Claims and Manufacturing data. Against the Japanese yen, the dollar slid as low as 81.86 from 83.09.
  • The Australian dollar rallied to an all-time high supported by higher than expected Producer Price Index data. The stronger PPI figure, which is a significant indicator of inflation, raised expectations for an interest rate hike. The Aussie is also supported by the surging commodity prices and investors' higher demand for risk. The Aussie rallied versus the dollar rising as high as 1.0772 from 1.0539.
  • Sterling rose against the dollar recovering from an initial disappointment after the Bank of England MPC minutes. Expectations for an early interest rate hike faded as the minutes sounded dovish. Votes remained unchanged with three members voting for higher rates and one member voting for further Quantitative Easing. Against the greenback, sterling ticked as high as 1.6474 from yesterday's 1.6308.
  • Oil prices ticked higher at 112.39 dollars a barrel from 107.82. Gold rose to a fresh record high at 1508.82 dollars an ounce from 1493.29. Silver also rallied to 46.04 dollars an ounce from 43.82

Currency to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4500 with a preference to enter Long positions at 1.4510
  • § The USDJPY pivot point is at 82.60 with a preference to enter Short positions at 82.55             

Today's calendar and market movers:

  • § UK Retail Sales in March is forecasted to fall 0.5%
  • § UK Public Sector Net Borrowing in March is forecasted to rise to 18.55B
  • § US Initial Jobless Claims is forecasted to 392K
  • § US Manufacturing Survey in April is forecasted to fall to 37

Equity Markets:                                              

US equities were positive on Wednesday with the S&P500 trading up 1.35% and the DJIA trading up 1.52%. The European bourses were also positive with the FTSE trading up 2.13%, the DAX up 2.98% and the CAC up 2.46%. The NIKKEI and the HSI at the time of writing are trading up 1.06% and 0.85% respectively.

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