EU Morning Report

Trichet's dovish tone put the euro under pressure

  • The euro plummeted against its major counterparts yesterday after the European Central Bank Interest Rate meeting. Interest rates remained unchanged at 1.5% but Jean-Claude Trichet's dovish tone during his press conference put the euro under pressure. His speech signaled a change in the central bank's policy direction after saying that inflation risks are now balanced. Inflation is forecast to fall below the central bank's target of 2% and, in addition, GDP growth was revised significantly lower. After the conference, the single currency sharply dropped to a two month low at 1.3872 versus the dollar from 1.4088 as no more tightening is expected by the ECB. Against the Japanese yen, the euro dipped to 107.53 from 109.02.
  • The US dollar edged higher after the Federal Reserve Chairman Ben Bernanke announced no new insights and specific plans to help the economy during his speech. US President Barack Obama detailed his 447 billion dollar job plan yesterday to boost hiring but the reaction was muted as investors have doubts the plan can pass through the Congress. Focus now turns to the G7 weekend meeting. Against the Japanese yen, the greenback advanced to 77.58 up from 77.13.  Against the Swiss franc, the dollar rose to 0.8768 from 0.8583.
  • The British Pound got some relief after the Bank of England kept interest rates unchanged at their policy meeting yesterday. Against the dollar, sterling jumped as high as 1.6082 from an eight-week low at 1.5913 but later the pair surrendered some of its gains to trade as low as 1.5945. Attention shifts to the MPC meeting minutes expected in two weeks.   
  • Oil prices ticked lower to 88.22 dollars a barrel from 90.20. Gold edged higher to 1876.82 dollars an ounce from 1813.70. Silver also rose hitting 42.64 dollars an ounce from 41.38.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.3970 with a preference to enter Short positions at 1.3960
  • § The USDJPY pivot point is at 77.30 with a preference to enter Long positions at 77.35
  • § The OIL pivot point is at 87.70 with a preference to enter Long positions at 87.70
  • § The Gold pivot point is at 1846 with a preference to enter Long positions at 1846                         

Today's calendar and market movers:

  • § UK Producer Price Index- Output in August is forecast to gain 0.1%
  • § UK Producer Price Index- Input in August is forecast to fall 1.5%
  • § Canada Net Change in Employment in August is forecast to rise to 25K
  • § Canada Unemployment Rate in August is forecast to rise to 7.3%

Equity Markets:                                                

US equities were negative on Thursday with the S&P500 trading down -1.06% and the DJIA down -1.04%. The European bourses were also positive with the FTSE trading up 0.41%, the DAX up 0.05% and the CAC up 0.41%. The NIKKEI and the HSI at the time of writing are trading down -0.67% and up 0.22% respectively.

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