Morning Report: 07.30

• This morning, further explosions at the Fukushima Daiichi nuclear plant and fears over a full blown nuclear crisis sent the Japanese Nikkei tumbling by 10% this morning. US stock market futures are also pointing to significant drops on stock markets across the world with the S&P 500 futures down 2%.
• On currency markets, the biggest fallers are the Australian dollar and Canadian dollar. The AUD/ USD is down 1.2% with the AUD/ JPY down 1.35%. The USD/ CAD is up 0.78%. Both of these counties are big uranium exporters, but with nuclear energy now a dirty word, this vital export is looking fragile.

• The yen is holding firm despite the disaster with the USD/ JPY down slightly and big gains against other currencies.
• The dollar is strong across the board as falling commodities push money back to the perceived safety of the greenback.

Coming up today:

• The trading outlook is changing by the minute so planned economic news items will be secondary to developments in Japan.
• Today we have the all day meeting of the European Economic and Financial Affairs Council as leaders thrash out the final details of the weekend’s broad agreements on peripheral debt.
• At 10.00 we have German ZEW economic sentiment.
• US TIC long term purchases follow at 13.00, then we have the latest rate statement from the US Federal reserve.

Bet Idea: Canadian dollar

• A flight to quality is setting in today with the US dollar, Japanese yen and the Swiss franc in demand.
• There is little to choose between the British pound and euro today as traders view them as equally risky to hold. The EUR/ GBP is unchanged so far today, but its unlikely to stay this way for long, especially with German ZEW sentiment due later.
• Between the GBP and EUR, it’s the ECB that has been emitting the more hawkish noises about strong vigilance with regards to inflation. Traders have been speculating that a rate hike for the eurozone could come as early as the April 7th meeting. However the Japanese earthquake could be a game changer in many ways and already WTI crude prices have dropped below $100 a barrel. This may in turn ease inflation pressures, which could lessen the probability of sustained interest rate hikes from the ECB.

• One way to play this on the EUR/ GBP might be a LOWER trade predicting that the EUR/ GBP will close below 0.8600 in 30 days time for a potential return of 116%.
• You can find direct links to this trade idea here.

Summary:

*Note – There will be no afternoon report today.

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