EU Morning Report

Uncertainty over US debt ceiling weighs on the dollar

  • The US dollar continues to weaken against its major counterparts weighed by the lack of progress towards an agreement on the US debt ceiling plan. The US risks of losing its AAA rating if a plan is not agreed before the August 2 deadline while US President Barack Obama warns of a deep economic crisis. World equities turned negative while safe haven gold rose to a fresh record high. Against the Japanese yen, the dollar dipped to 77.69 from 78.00 but there was no talk of intervention by the Bank of Japan. Versus the safe haven Swiss franc, the dollar continues to be under pressure falling to a record low at 0.7997 from 0.8066. Yesterday, Manufacturing Index and New Home Sales disappointed investors by showing worse than expected figures. Focus turns to the US Durable Goods Orders.
  • The euro firmed against the dollar rising as high as 1.4535 from 1.4357. The single currency got a boost last week against its major counterparts as the agreement on a bailout plan for Greece eased eurozone debt contagion fears. ECB member Christian Noyer said in an interview that the European Central Bank is in a state of strong vigilance further supporting the single currency. 
  • The Australian dollar rallied today after Consumer Price Index revealed a higher than expected gain of 0.9%. Higher inflation may indicate the need for an interest rate hike by the Reserve Bank of Australia. Against the greenback, the Aussie hit a 28-year high at 1.1062 to 1.0937. Aussie's neighbor, the Kiwi, rose against the greenback, hitting a post-float high at 0.8762 from 0.8627.
  • Sterling edged higher hitting a one and a half month high against the greenback at 1.6439 from 1.6265. Gross Domestic Product in the second quarter showed a 0.2% gain as expected.    
  • Oil prices ticked higher to 100.59 dollars a barrel from 97.75. Gold edged higher to a record high at 1625.12 dollars an ounce from 1607.72. Silver also ticked higher to 41.04 dollars an ounce from 39.98.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4450 with a preference to enter Long positions at 1.4470
  • § The USDJPY pivot point is at 78.15 with a preference to enter Short positions at 78.05
  • § The OIL pivot point is at 97.80 with a preference to enter Long positions at 97.80
  • § The Gold pivot point is at 1607 with a preference to enter Long positions at 1607                          

Today's calendar and market movers:

  • § US Durable Goods Orders in June is forecast to gain 0.3%
  • § Switzerland KOF Leading Indicator in July is forecast to fall to 2.10

Equity Markets:                                           

US equities were negative on Tuesday with the S&P500 trading down -0.41% and the DJIA down -0.73%. The European bourses were mixed with the FTSE trading up 0.08%, the DAX up 0.07% and the CAC down -0.66%. The NIKKEI and the HSI at the time of writing are trading down -0.53% and -0.07% respectively.

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