EU Morning Report

Reserve Bank of New Zealand keeps interest rates on hold

  • The US dollar continues to weaken broadly weighed by the lack of progress towards an agreement on the US debt ceiling plan. The US risks of losing its AAA rating if a plan is not agreed before the August 2 deadline while US President Barack Obama warns of a deep economic crisis. World equities turned negative while safe haven gold rose to a fresh record high. Against the Japanese yen, the dollar dipped to a four month low at 77.57 from 78.00 but then recovered to 78.17 on fears of an intervention by the Bank of Japan. Versus the Swiss franc, the dollar continues to be under pressure falling to a new record low at 0.7995 and then recovered to 0.8046. Yesterday, Durable Goods Orders disappointed investors by showing weaker than expected figures. Focus now turns to Jobless Claims and Pending Home Sales.
  • The euro shed 1.4% against the dollar dropping to as low as 1.4330 from 1.4535. Investors are still not convinced that the bailout deal agreed for Greece during last week's EU summit is enough to prevent a eurozone debt contagion. German Finance minister Wolfgang Schauble commented on eurozone debt crisis and said that Germany rejects any blank cheques to the European Financial Stability Facility further weighing on the single currency.
  • The Australian dollar remains firm against the dollar as higher inflation data may indicate a interest rate hike. Against the greenback, the Aussie is trading near a 28-year high at 1.1079 and the pair was last trading at 1.1038. Aussie's neighbor, the Kiwi, rose against the greenback to 0.8734 from 0.8678 after the Reserve Bank of New Zealand interest rate decision. The central bank decided to keep rates unchanged at 2.50% as it acknowledges that more stimulus is needed to ensure the economy is growing.
  • Oil prices ticked lower to 96.18 dollars a barrel from 99.53. Gold edged lower to 1608.69 dollars an ounce from 1628.56. Silver also ticked lower to 40.05 dollars an ounce from 41.43.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4410 with a preference to enter Short positions at 1.4400
  • § The USDJPY pivot point is at 77.70 with a preference to enter Long positions at 77.80
  • § The OIL pivot point is at 95.40 with a preference to enter Long positions at 95.40
  • § The Gold pivot point is at 1607 with a preference to enter Long positions at 1607                      

Today's calendar and market movers:

  • § Europe Consumer Confidence in July forecast to fall to -11.4
  • § US Initial Jobless Claims is forecast to fall to fall to 415K
  • § US Pending Home Sales in June is forecast to fall 2%

Equity Markets:                                               

US equities were negative on Wednesday with the S&P500 trading down -2.03% and the DJIA down -1.59%. The European bourses were also negative with the FTSE trading down -1.23%, the down -1.32% and the CAC down -1.42%. The NIKKEI and the HSI at the time of writing are trading down -1.65% and -1.03% respectively.

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