EU Morning Report

Swiss franc sharply drops after SNB's measures

  • The euro rallied against the Swiss franc yesterday after the Swiss National Bank (SNB) surprised investors by intervening in the currency markets. The SNB announced that it will not allow the exchange rate of the euro against the Swiss franc to fall below 1.2000 and that it is prepared to spend an unlimited amount buying foreign currencies. The central bank's move is an effort to weaken its currency as a strong franc poses a high risk for Switzerland's exports and creates deflation. Versus the Swiss franc, the single currency gained 10.3% rising to 1.2153 from 1.1018. Against the US dollar, the euro initially climbed to 1.4285 but then surrendered its gains to trade as low as 1.3972. Versus the Japanese yen, the single currency jumped to 109.95 but failed to hold on to its gains and later dropped to 108.02. Focus turns tomorrow's Interest Rate Decision by the European Central Bank.
  • The US dollar edged lower against a basket of currencies but rose against the Swiss franc. SNB's move to set a ceiling for the Swiss franc sent the dollar higher against the franc. The pair gained 10% rising to 0.8626 from 0.7839 Against the Japanese yen, the greenback dipped to 77.06 from 77.72 after the Bank of Japan decided to keep its monetary policy unchanged leaving rates near zero levels.
  • The Australian dollar advanced today after Gross Domestic Product reveled better than expected figures. The report showed that Australia's economy grew by 1.2% in the second quarter of 2011 while the market expected 1% growth. Against the dollar, the Aussie fell as low as 1.0605 from 1.0482. 
  • Oil prices ticked higher to 86.65 dollars a barrel from 83.13. Gold edged lower to 1818.48 dollars an ounce from a record high at 1920.86. Silver also fell today hitting 40.44 dollars an ounce from 43.24.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4100 with a preference to enter Short positions at 1.4090
  • § The USDJPY pivot point is at 77.50 with a preference to enter Short positions at 77.45
  • § The OIL pivot point is at 85.00 with a preference to enter Long positions at 85.00
  • § The Gold pivot point is at 1870 with a preference to enter Short positions at 1870                        

Today's calendar and market movers:

  • § UK Manufacturing Production in July is forecast to gain 1.9%
  • § UK Industrial Production in July is forecast to fall 0.5%
  • § Germany Industrial Production in August is forecast to gain 0.5%
  • § Canada Interest Rate Decision is forecast to keep rates unchanged at 1%

Equity Markets:                                            

US equities were negative on Tuesday with the S&P500 trading down -0.74% and the DJIA down -0.90%. The European bourses were mixed with the FTSE trading up 1.06%, the DAX down -1% and the CAC down -1.13%. The NIKKEI and the HSI at the time of writing are trading up 2.03% and 1.2% respectively. 

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