EU Morning Report- ECB and BoE leave interest rates unchanged!
Friday, July 9th, 2010ECB and BoE leave interest rates unchanged!
- The dollar weakened yesterday as risk appetite kicked-in following ECB President Trichet’s press conference. The ECB monetary stance had not altered however Trichet’s upbeat attitude permeated confidence across the board. The Euro Zone, Trichet’s says, was growing at a moderate pace and that the latest string of data was very good. He also highlighted that the markets have tended to be extremely pessimistic about the European economy however data have not confirmed such a stance. When quizzed about the stress tests however he was reluctant to provide further information saying that everything they wanted to know would be addressed in the release date of the stress tests. Some market participants are arguing that the stress tests are not stringent enough and the results will not bring the necessary confidence in the markets. Others argue that the release of certain scenarios may show that some banks are insolvent and spark another bout to safety in the expense of the financial system. Overall price action in the EURUSD was between 1.2617 – 1.2710.
- In the UK we had the BoE policy rate decision which left interest rates unchanged as widely expected. The GBPUSD had made considerable headway this week following the MPC minutes that showed one member of the BoE diverged from the rest voting for a rate hike. Although economic strength is not supportive for rate hikes a string of higher than expected inflation is worrisome and may deem the need for a hike so as to tame such fears. Industrial production figures were released yesterday which were widely encouraging. The year on year figure came in at 2.6% and the month on month at 0.7% indicating a pickup in activity and casting some hope over the economy. The big fear for UK growth now is the deficit reductions undergone by the new government. Let it be known that almost half of the UK economy equates to the size of government expenditure and a sharp reduction in this spending may jeopardize UK growth. GBPUSD price action was between 1.5173 – 1.5130.
Currency to watch out for: EURUSD & USDJPY
- The EURUSD pivot point is at 1.2620 with a preference to enter into Long positions at 1.263
- The USDJPY pivot point is at 88.25 with a preference to enter Long positions at 88.30
Today’s calendar and market movers:
- German CPI is expected at 0.9%
- The UK Trade Balance is expected to come to GBP -7 Bn
- Canadian Unemployment is estimated at 8.1%
- Finally, US wholesale Sales are expected at 0.5%
Equity Markets:
- US equities were closed positive yesterday with the S&P500 closing at 0.94% and the DJIA closing at 1.20%. The European bourses were positive yesterday with the FTSE up 1.81% the DAX and the CAC closing at 0.71 % and 1.57% respectively. The NIKKEI and the HSI at the time of writing is 0.72% and 1.45% respectively.
Written by Easy-Forex
