EU Morning Report- BoE policy unchanged, focus now on Greece

The euro (EUR) was offered some relief in the absence of any headlines from Europe but today the single currency plummeted after the release of poor Chinese economic data. Figures showed today that Chinese inflation moderated in April while Chinese retail sales came out lower than expected increasing concerns about an economic slowdown in the country. Asian equities dropped and risk aversion dominated the markets after JPMorgan said that it suffered a trading loss of about $2 billion from a failed trading strategy raising fears in the market. The political risk in Greece continues to weigh on the euro as Greek leaders are still trying to form a new government increasing the possibility for a repeat election in June. The question on investors’ mind is whether Greece will be able to avoid bankruptcy and stay in the euro. Versus the dollar, the single currency dropped to 1.2904 from 1.2979 traded yesterday.

The US dollar (USD) strengthened against a basket of currencies yesterday as risk aversion in the market is heightened. Against the safe haven Japanese yen (JPY) the greenback rebounded to 80.01 from 79.60 but in the absence of an intervention by the Bank of Japan and the deepening problems of the eurozone, the yen may remain strong on safe haven demand. Eyes turn to US Producer Price Index due later today.

The Australian dollar (AUD) slid today against the dollar to 1.0026 from 1.0142 after the softer than expected Chinese economic data raised concerns about an economic slowdown in Australia’s largest trade partner, China. The British pound (GBP) rose against the greenback to 1.6181 from 1.6091 after the Bank of England decided to keep interest rates at the ultra-low level of 0.5%. BoE also decided not to expand its asset purchasing program. Focus turns to the speech by Governor Mervyn King when the central bank will publish its economic forecasts. Today the pair edged lower and was last trading at 1.6101.

Oil edged lower to 95.78 dollars a barrel from 97.67. Gold (XAU) slid to 1581.74 dollars an ounce from 1601.67 and against the euro it edged higher to 1232.23 euro an ounce from 1229.44. Silver (XAG) dropped to 28.72 dollars an ounce from 29.45. Stay in tune throughout the day with !

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