EU Morning Report

Japanese yen plummets after the Bank of Japan intervention

  • The US dollar strengthened against a basket of currencies today. ADP Employment Change in July gave support to the greenback after it revealed higher than expected figures which may be an indication for tomorrow's Non Farm Payrolls.
  • Against the Japanese yen, the dollar rallied to 79.36 from 76.77 after the Bank of Japan stepped in the currency markets and intervened for the first time in four months. Heightened risk aversion in the market as well as growing concerns over the US economic growth resulted in the rise of the yen. Today, the central bank sold the yen in the market and eased its monetary policy in order to stem its rise as a strong yen has a negative impact on the Japanese economy.
  • Versus the Swiss franc, the dollar rallied after the Swiss National Bank announced a surprising cut in interest rates and warned it would take further measures in the currency markets to stop the franc from rising further. Even without physical intervention by the central bank, the franc dipped sending the USDCHF as high as 0.7800 from 0.7627.   
  • The euro dropped against the dollar today to 1.4265 from 1.4372 ahead of the European Central Bank interest rate decision. No change is expected in the monetary policy but focus turns to ECB President Jean-Claude Trichet press conference at 12:30 GMT.
  • Sterling rose against the dollar yesterday after service sector Purchasing Manager Index data showed stronger than expected figures. The pair rose to 1.6439 from 1.6250 but today it surrendered some of its gains to trade at 1.6342. Focus shifts to the Bank of England's interest rate decision today at 11 GMT.
  • Oil prices slid to 91.21 dollars a barrel from 93.73. Gold edged higher to a record high at 1672.91 dollars an ounce from 1651.88. Silver also ticked higher to 42.01 dollars an ounce from 40.53.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4250 with a preference to enter Long positions at 1.4260
  • § The USDJPY pivot point is at 78.40 with a preference to enter Long positions at 78.45
  • § The OIL pivot point is at 90.15 with a preference to enter Long positions at 90.15
  • § The Gold pivot point is at 1673 with a preference to enter Short positions at 1673                         

Today's calendar and market movers:

  • § UK Interest Rate Decision is forecast to keep rates unchanged at 0.5%
  • § Europe Interest Rate decision is forecast to keep rates unchanged at 1.5%
  • § US Initial Jobless Claims is forecast to rise to 405K

Equity Markets:                                               

US equities were positive on Wednesday with the S&P500 trading up 0.50% and the DJIA up 0.25%. The European bourses were negative with the FTSE trading down -2.34%, the DAX down -2.30% and the CAC down -1.93%. The NIKKEI and the HSI at the time of writing are trading up 0.23% and down -0.71% respectively.

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