EU Morning Report

Interest rate hike expectations continue to support the euro

  • The euro rose against a basket of currencies as Greece's approval of the five-year 78 billion euro austerity plan eased fears about Greece's future. On Saturday, EU finance ministers approved a 12 billion euro bailout fund for Greece's next quarterly installment. Today the euro fell after rating agency Standard & Poor's said that a debt rollover plan for Greece puts the country at risk as it may cut the country's rating to a selective default. After the comments, the euro dipped to 1.4510 from a one month high at 1.4577. The single currency is also supported by interest rate hike expectations as hawkish comments by ECB policymakers signaled that a rate hike will be decided at the European Central Bank Interest Rate meeting on Thursday. Consumer Price Index adds strength on expectations after it showed that inflation remains elevated gaining 2.7% in June, which is a well above target figure.
  • The US dollar weakened against high yielding currencies such as the euro and the Aussie on an improved risk appetite in the market.. On Friday, Consumer Confidence Index and Construction spending fell more than expected while ISM Manufacturing revealed a higher than expected figure. Against the safe haven Swiss franc, the greenback rose to a two-week high at 0.8525 from 0.8407. Against the Japanese yen, the dollar also rose edging as high as 81.14 from 80.55.
  • The Australian dollar softened today against the greenback weighed by weaker than expected retail sales data. The pair stepped off a one and a half month high at 1.0789 to trade at 1.0712. Sterling plummeted yesterday after data revealed that consumer confidence dropped by more than expected in June. The British pound remains under pressure after the Bank of England kept alive the prospect of additional quantitative easing. Against the greenback sterling dipped to 1.5988 from 1.6096.
  • Oil prices rose to 95.46 dollars a barrel today from 93.46. Gold fell to 1478.05 dollars an ounce from 1501.63. Silver also ticked lower at 33.44 dollars an ounce from 34.75. 

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4475 with a preference to enter Long positions at 1.4485
  • § The USDJPY pivot point is at 80.55 with a preference to enter Long positions at 80.60
  • § The OIL pivot point is at 93.45 with a preference to enter Long positions at 93.45
  • § The Gold pivot point is at 1497.50 with a preference to enter Short positions at 1497.50                        

Today's calendar and market movers:

  • § Europe Investor Confidence in July is forecast to fall to 1.2
  • § UK PMI Construction in June is forecast to fall to 53.7
  • § Europe Producer Price Index in May is forecast to fall 0.1%

Equity Markets:                                              

US equities were positive on Friday with the S&P500 trading up 1.44% and the DJIA up 1.36%. The European bourses were also positive with the FTSE trading up 0.74%, the DAX up 0.59% and the CAC up 0.63%. The NIKKEI and the HSI at the time of writing are trading up 0.79% and 1.78% respectively.

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