EU Morning Report - China reassures support for the EURO, exports gain 50%!

Posted by admin as Forex News

China reassures support for the EURO, exports gain 50%!

•  As the trading session got under way yesterday we saw an initial spike in risk appetite both in equities and FX pairs. The Euro managed to break above the 1.2000 psychological level and traded above these levels for most of the EU trading session. As New York got its trading underway risk aversion returned to the markets and equities lost plenty of their earlier gains and the DJIA fell 0.4%. The Euro also got hammered and traded back down to 1.1955 from 1.2074 previous highs. Ben Bernanke who is the Chairman of the Federal Reserve testified before the House of Budget Committee on the Economy however overall his comments were expected and he said nothing new or market moving. He reiterated the recovery will be sustainable despite ‘’significant restraints” the long run inflation expectations are stable and that the Fed will begin raising interest rates as the job market recovers.
•  In the EU we saw both German and Portuguese bond issues run smoothly despite the surge in funding costs faced by Southern EU members’ states. No major data out of the region yesterday with the biggest market moving event been Chinas comments that it will continue to support the Euro followed by a 50% surge in Chinese exports which spurred a bout of risk appetite buying and short covering. The Euro managed to trade back up to 1.2055 from the previously mentioned lows of 1.1955. Trichet made some comments overnight saying that the ECB’s mandate is price stability and it will deliver he also made calls for further EU integration in terms of policy.
•  In Japan we saw another surge in capital expenditure of 4% indicating a gradual increase in demand on the other hand we saw a sharp decline in bank lending for the country showing that much of Japans demand still comes from its export orientated economy. USDJPY price action was between 91.66 - 91.04.

 Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.1995 with a preference to enter into Long positions at 1.2005
• § The USDJPY pivot point is at 90.85 with a preference to enter Long positions at 90.90

Today’s calendar and market movers:

• § Germany Consumer Price Index expected to gain by 0.1% for May
• § Bank Of England Rate Decision expected to remain unchanged at 0.5%
• § European Central Bank Rate decision expected to remain unchanged at 1%
• § US Jobless Claims for the week expected at 4.64 mio
• § US International Trade for April expected to drop by $41 bio

 Equity Markets:

•  US equities closed negative yesterday with the S&P500 down by -0.59% and the DJIA down by -0.59%. The European bourses were positive yesterday with the FTSE up 1.15% the DAX and the CAC closing at 1.98% and 1.96%. The NIKKEI and the HSI at the time of writing is 1.03% and 0.49% respectively.