EU Morning Report

S&P downgrades Italy's credit rating

  • The euro plummeted against its major counterparts after rating agency Standard & Poor's downgraded Italy by one notch to A keeping the country on a negative outlook. S&P justified the move by emphasizing on Italy's weakening economic growth and the political uncertainty in the country, which creates difficulties in reaching its fiscal targets. The downgrade caused eurozone debt contagion fears while Greece risks of running out of cash within the next weeks if no new steps are taken to secure the next tranche of funding. Against the US dollar, the euro dipped as low as 1.3593 from 1.3720. Versus the Japanese yen, the euro edged as low as 103.95 yesterday from 105.22, a decline of 1.2%.  
  • The US dollar advanced against a basket of currencies today as heightened risk aversion in the market spurred high demand for the safe haven currency. Focus turns to the Federal Reserve two day policy meeting beginning today and investors are expecting to see if new monetary easing measures will be announced. Against the Swiss franc, the dollar edged higher to 0.8868 from 0.8798. Against the Japanese yen, the dollar jumped to 76.75 from 76.32.
  • The Australian dollar edged lower against the dollar as high risk aversion dampened demand for high yielding currencies. The Reserve Bank of Australia meeting minutes was released showing a neutral stance and saying that eurozone debt crisis remains a risk. The pair slid to 1.0147 from 1.0266 traded yesterday. The British Pound also dropped versus the dollar hitting 1.5632 from 1.5748 on fears Greece may be forced to default.
  • Oil prices slid today to 84.91 dollars a barrel from 87.43. Gold fell to 1769.51 dollars an ounce from 1821.95. Silver also ticked lower to 38.95 dollars an ounce from 40.52.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.3710 with a preference to enter Short positions at 1.3700
  • § The USDJPY pivot point is at 76.75 with a preference to enter Short positions at 76.75
  • § The OIL pivot point is at 87.50 with a preference to enter Short positions at 87.50
  • § The Gold pivot point is at 1790 with a preference to enter Short positions at 1790                           

Today's calendar and market movers:

  • § US Building Permits in August is forecast to fall to 0.59M
  • § US Housing Starts in August is forecast to fall to 0.59M

Equity Markets:                                               

US equities were negative on Monday with the S&P500 trading down -0.98% and the DJIA down -0.94%. The European bourses were also negative with the FTSE trading down -2.03%, the DAX down -2.83% and the CAC down -3.00%. The NIKKEI and the HSI at the time of writing are trading down -1.75% and up 0.1% respectively.

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