EU Morning Report
Euro rebounds as Asian stocks jump
- The euro rebounds against the dollar during yesterday's US session as risk appetite slightly recovers. Japanese stocks edge higher and demand for riskier assets rises. The nuclear crisis in Japan knocked the euro to 1.3854 dollars on Tuesday but the single currency managed to recover its losses and climb as high as 1.4012. During the Asian session rating agency Moody's downgraded Portugal's debt slightly weakening the euro. But the euro's decline was limited as investors are focusing on EU's new rescue package and rate hike expectations. After Portugal's downgrade the single currency rose to trade as high as 1.40 dollars. Today's Consumer Price Index in Europe is expected to reveal a 0.4% gain. An increase above the expected figure may further support the euro.
- During yesterday's policy meeting, the Fed decided to keep interest rates and its asset buying scheme unchanged. The FOMC statement revealed a slightly more hawkish stance saying that the country's economy is improving. Fed officials did not make comments on the recent developments in Japan and the Middle East but they said that inflation is closely watched.
- The Japanese Yen climbed against its major counterparts as the Japanese seek to liquidate their assets for reconstruction. As the nuclear crisis in Japan grows, investors buy the yen expecting a repatriation of funds. Against the Japanese Yen, the dollar broke below the 81 level sliding as low as 80.59 from 82.03. The euro also fell against the Yen falling as low as 111.95 yesterday from 114.65.
- The Australian dollar dropped against the greenback as demand for high yielding assets is low. Yesterday, the Aussie fell well below parity sliding to 0.9813 from 1.0096. Later, the Aussie strengthened supported by a rise in world equities and a slightly improved risk sentiment jumping to 0.9963.
- Oil prices continue to fall edging dropping to 96.20 dollars a barrel from 101.31 traded yesterday. Gold prices also plummeted on Japan's nuclear crisis. The precious metal dipped to 1380.69 dollars an ounce from 1425.91.
Currency to watch out for: EURUSD & USDJPY
- § The EURUSD pivot point is at 1.3925 with a preference to enter into Long positions at 1.3935
- § The USDJPY pivot point is at 81.25 with a preference to enter Short positions at 81.20
Today's calendar and market movers:
- § UK Unemployment Rate in January is forecasted to remain unchanged at 7.9%
- § Europe Consumer Price Index in February is forecasted to gain 0.4%
- § US Housing Starts in February is forecasted to fall to 0.575M
US equities were negative on Tuesday with the S&P500 trading down -1.12% and the DJIA unchanged. The European bourses are also negative with the FTSE trading down -1.38%, the DAX down -3.19% and the CAC down -2.51%. The NIKKEI and the HSI at the time of writing are trading up 5.68% and down -0.06% respectively.
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