EU Morning Report

Soaring Italian and Spanish bond yields weigh on the euro

  • The US dollar strengthened against high yielding currencies such as the euro and the Australian dollar but plummeted against the safe haven Swiss franc and Japanese yen. With US policymakers reaching a deal on the US debt ceiling, the threat of a US default started to fade. Investors are now focusing on the health of the global economy following the sluggish US Manufacturing figures in July. Risk aversion heightened, world equities turned negative and precious metals rallied. Data also showed US Consumer Spending was lower in June adding to fears of an economic slowdown ahead of Friday's Non-Farm Payrolls. Against the Japanese yen, the dollar took a dive to 76.96 from 77.81. Versus the Swiss franc, the dollar hit a fresh record low at 0.7607 from 0.7847.
  • The euro dropped against the dollar to as low as 1.4150 from 1.4281 as risk aversion in the market remains elevated. Italian and Spanish bond yields jumped yesterday reflecting investors' uncertainty about Greece's bailout plan and growing euro zone debt contagion fears.
  • The Australian dollar shed 3% against the dollar edging as low as 1.0678 from 1.1007. Some speculators argue that Australia's interest rates may be cut in order to avoid recession following yesterday's dovish statement by the Reserve Bank of Australia. The Aussie is also weighed after Retail Sales revealed lower than expected figures in June.
  • Oil prices shed 3% sliding to 92.76 dollars a barrel from 95.66. Gold edged higher to a record high at 1660.95 dollars an ounce from 1618.25. Silver also ticked higher to 40.85 dollars an ounce from 39.26.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4250 with a preference to enter Short positions at 1.4240
  • § The USDJPY pivot point is at 77.40 with a preference to enter Short positions at 77.35
  • § The OIL pivot point is at 95.45 with a preference to enter Short positions at 95.45
  • § The Gold pivot point is at 1651 with a preference to enter Long positions at 1651                          

Today's calendar and market movers:

  • § Europe Purchasing Manager Index Services in July is forecast to fall to 51.4
  • § UK Purchasing Manager Index Services in July is forecast to fall to 53.2
  • § Europe Retail Sales in June is forecast to gain 0.5%
  • § US ADP Employment Change in July is forecast to rise to 100K
  • § US Factory Orders in June is forecast to fall 0.7%

Equity Markets:                                                

US equities were negative on Tuesday with the S&P500 trading down -2.56% and the DJIA down -2.19%. The European bourses were also negative with the FTSE trading down -0.97%, the DAX down -2.26% and the CAC down -1.82%. The NIKKEI and the HSI at the time of writing are trading down -2.05% and -1.90% respectively. 

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