EU Morning Report – Risk aversion returns as doubt is cast over Greece’s bailout!
Thursday, April 8th, 2010EU Morning Report
Risk aversion returns as doubt is cast over Greece’s bailout!
- Wednesday trading saw the dollar mixed across the board as the market tried to digest the FOMC minutes the previous day and was also slightly cautious ahead of Ben Bernanke’s speech on the day. In his speech Bernanke recognized that the US economy is growing again but once again pleaded for caution as a premature rate hike may choke of the recovery. Kansas City Fed President Hoenig also spoke yesterday saying that the Fed should be proactive and raise the rates at small increments over time rather than wait for signs of inflation. 2 year yields traded lower to 1.06% following the FOMC minutes on Tuesday and the USDJPY has tracked the yields lower to 93.18. US Equities closed negative at 0.5%.
- In Europe yesterday focus was solely on the EU/IMF agreement with Greece as speculation mounted on a possible attempt by Greece to renegotiate the terms and that Germany insisted that in the event of a bailout the plan should charge Greece market rates. Also opposition is building in the Greek parliament over further austerity measures that the IMF may impose on Greece following the bailout agreement. On the data front we had Q4 GDP which came in at 0.0% increasing the expectations of a dovish ECB to come. Overall price action for the EURUSD was between 1.3400 – 1.3310.
- In the UK the focus will turn to the BoE monetary policy meeting today. The market largely expects the rate to remain unchanged at 0.5% and that the rhetoric on QE will remain the same. That is that the BoE is ready to buy more Gilts should economic conditions deem it necessary. The market is focused very much on the political landscape within the UK at the moment and that the risk of a hung parliament is weighing greatly on the pound. Price action for the Cable was between 1.5277 – 1.5136.
Currency to watch out for: EURUSD & USDJPY
- § The EURUSD pivot point is at 1.3380 with a preference to enter into short positions at 1.3370
- § The USDJPY pivot point is at 93.75 with a preference to enter short positions at 93.70
Today’s calendar and market movers:
- § UK Halifax House Prices for March, previous month reading was -1.5%
- § EU Retail Sales for February is forecasted to be -0.1%
- § UK BoE Rate Decision expected to remain unchanged at 0.5%
- § ECB Rate Decision expected to remain unchanged at 1%
- § US US Jobless continuous claims for the week expected at 4.65 mln
Equity Markets:
- US equities closed negative on Wednesday with the DJIA and the SP500 closing -0.66% and -0.59% respectively. The European bourses were negative on Wednesday with the FTSE down -0.32% the DAX and the CAC closing down at -0.48% and -0.67% respectively. The NIKKEI and the HSI at the time of writing is -1.09% and -0.17% respectively.
Written by Easy-Forex
