EU Morning Report

Lack of US debt ceiling plan weighs on the dollar

  • The US dollar fell against its major counterparts weighed by the lack of an agreement on the US debt ceiling. The US risks of losing its AAA rating if a plan is not agreed before the August 2 deadline. Against the Japanese yen, the dollar jumped to 78.69 from 77.89 but there was no talk of intervention by the Bank of Japan. Versus the safe haven Swiss franc, the dollar continues to be under pressure falling to a record low at 0.8005 from 0.8155. Focus turns to the US New Home Sales and Manufacturing Index data.
  • The euro jumped against the dollar rising as high as 1.4509 from 1.4324. On Monday, credit rating agency Moody's downgraded Greece's sovereign rating by three notched to Ca but the single currency showed little reaction to the move. The single currency got a boost last week against its major counterparts as the agreement on a bailout plan for Greece eased eurozone debt contagion fears. Against the Japanese yen, the euro climbed to 113.55 from 112.03.
  • The Australian dollar rallied today supported by the dollar weakness and surging commodity prices. Focus now turns to the Consumer Price Index as it will be a key driver for the central bank's monetary policy. Against the greenback, the Aussie hit a three month peak at 1.0929 to 1.0795. Aussie's neighbor, the Kiwi, rose against the greenback, hitting a post-float high at 0.8705 from 0.8611.
  • Sterling edged higher hitting a one and a half month high against the greenback at 1.6367 from 1.6261. Attention turns to the Gross Domestic Product in the second quarter where a 0.2% increase is expected.   
  • Oil prices ticked higher to 99.64 dollars a barrel today from 98.56. Gold edged lower to 1609.12 dollars an ounce from 1621.50. Silver also ticked lower to 39.83 dollars an ounce from 41.05.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4400 with a preference to enter Long positions at 1.4425
  • § The USDJPY pivot point is at 78.40 with a preference to enter Short positions at 78.30
  • § The OIL pivot point is at 98.40 with a preference to enter Long positions at 98.40
  • § The Gold pivot point is at 1600 with a preference to enter Long positions at 1600                        

Today's calendar and market movers:

  • § UK Gross Domestic Product in Q2 is forecast to gain 0.2%
  • § US New Home Sales in June is forecast to rise to 0.32M
  • § US Richmond Fed Manufacturing Index in July is forecast to rise to 5
  • § US Consumer Confidence in July is forecast to fall to 56.0

Equity Markets:                                              

US equities were negative on Monday with the S&P500 trading down -0.56% and the DJIA down -0.70%. The European bourses were mixed with the FTSE trading down -0.16%, the DAX up 0.25% and the CAC down -0.77%. The NIKKEI and the HSI at the time of writing are trading up 0.63% and 0.94% respectively.

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