EU Morning Report

Slovakia puts EU on hold

  • The euro, trapped in sideways trading, produced modest gains against most of its major counterparts. The single currency’s reaction to the Slovak rejection of the Eurozone rescue fund expansion was minor. This was due to estimates that a new – positive - voting will take place possibly within this week. Versus the US dollar, the euro climbed to 1.3683 from 1.3565. Against the Swiss Franc, the single currency jumped to 1.2415 from 1.2313. Against the Japanese yen, the euro rose to 104.89 from 104.01. EU Commission President Barroso is expected to reveal his plan for EU banks recapitalization this afternoon. Investors will also turn their attention to Mario Draghi’s speech at a world economy conference in Rome, and try to infer any policy intentions. This comes one day after the outgoing ECB President Jean-Claude Trichet characterized the debt crisis as systemic and called for decisive actions.
  • The US dollar recorded mixed results against a basket of currencies as news from Europe dominated the spotlight but failed to provide strength for direction. Against the Swiss franc, the US dollar rose to 0.9121 from 0.9025. Against the Japanese yen, the greenback advanced to 76.75 from 76.60. The US Federal Reserve will disclose minutes from September's FOMC policy meeting at 18:00 GMT. This was the meeting where “Operation Twist” - a rearrangement of the central bank’s balance sheet in order to reduce long-term borrowing costs – was unveiled and investors will be eager to gain insight on the Fed’s thought process.
  • The Australian dollar failed to sustain its advance above 1.0000 and dropped to 0.9904 from 1.0002 against the US dollar, possibly indicating a turn towards risk aversion. The British pound plunged to 1.5573 from 1.5663 against the US dollar. This came after Bank of England’s Monetary Policy Committee member, Miles, admitted his uncertainty on the prospect of further quantitative easing and noted GDP would likely be flat in fourth quarter.
  • Oil prices dropped to 83.93 dollars a barrel from 86.61. Gold also recorded loses declining to 1653.75 dollars an ounce from 1684.50. Silver moved in the same direction to 31.33 dollars an ounce from 32.5120.  

Currencies to watch out for: EURUSD & USDJPY  

§  The EURUSD pivot point is at 1.3570 with a preference to enter Long positions at 1.3570

§  The USDJPY pivot point is at 76.90 with a preference to enter Short positions at 76.85

§  The OIL pivot point is at 84.00 with a preference to enter Long positions at 84.00

§  The Gold pivot point is at 1650 with a preference to enter Long positions at 1650


Today’s calendar and market movers:

§  UK Claimant Count Change for September is forecast to rise by 25K

§  UK Unemployment Rate for August is forecast to rise to 8.0%

§  EU Industrial Production for August is forecast to drop by 0.7%

§  Canadian New Housing Price Index for August is forecast to rise by 0.1%


Equity Markets:


The European bourses were mixed, with the FTSE trading down -0.06%, the DAX up 0.30% and the CAC down -0.25%. US equities were mixed as well, with the S&P500 trading marginally up 0.05% and the DJIA down -0.15%. The NIKKEI and the HSI at the time of writing are trading down -0.17% and up 0.63% respectively.


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