Daily FX: EUR/USD, GBP/USD, USD/JPY And AUD/USD: May 09, 2014
iFOREX | May 09, 2014 05:27AM ET
The U.S. Dollar weakened against the majors following Federal Reserve Chairwoman Janet Yellen’s testimony before the Joint Economic Committee, during which she stated that U.S. monetary policy needs to remain accommodative, given the fact that many Americans remain unemployed, while the level of inflation has not yet reached the desired 2 percent. When questioned as to when policy makers plan to raise the interest rate, Mrs. Yellen replied that the bank does not have a set timetable at present. She added that while there have been signs of “solid growth,” the economy is not “out of the woods.” Meanwhile, reports indicated that properties referred to as “trophy-homes” or houses valued in the millions are being purchased as speculators move their funds out of harbor assets and into real estate. Sales already surpassed $100 million so far this year. The greenback dipped versus the Yen and the Euro as sentiment improved in the markets as China released data showing that exports rose 0.9 percent in April in comparison with one year prior, while imports climbed 0.8 percent.
The Euro came close to an eight week high versus the greenback on speculation that the European Central Bank won’t announce another round of stimulus at present. According to some analysts, market traders are becoming inpatient and don’t believe that ECB President Mario Draghi is willing to move ahead with the measure needed to help debase the currency and boost inflation. The Euro was mostly supported by solid economic reports pointing to economic recovery within the Euro-zone, which in turn bolstered risk appetite. But the monetary authorities could still surprise traders given the fact that inflation posted at 0.7 percent in April. The British Pound continued to hover close to a five-year high against the U.S. Dollar as the Bank of England announced that it would maintain the status quo on monetary policy. Following a two-day meeting, policy makers decided to leave the interest rate unchanged and made no alterations to quantitative easing.
The Yen traded mixed versus the U.S. Dollar on news that Russia ordered its troops to retreat from the border with Ukraine. Also, President Vladimir Putin announced that he would do whatever he can to reduce tensions. The Yen advanced against its U.S. counterpart following positive macroeconomic fundamentals out of China, and as Federal Reserve Chairwoman Yellen prepared for a second day of testimony before lawmakers.
Lastly, the Australian Dollar traded at the highest price in three weeks against the greenback due to the release of strong Employment figures, and news that China’s imports and exports rose. New Zealand’s Dollar traded steadily versus its U.S. peer subsequent to the announcement out of China, but did not rally as investors remained cautious ahead of Mrs. Yellen’s second day of testimony. Speculators are also exerting caution as Governor of the Reserve Bank of New Zealand, Graeme Wheeler, intimated that the bank could intervene in order to debase the monetary unit. On the data front, the small South Pacific nation reported that property values went up at the slowest pace in close to seven months due to a hike in the key cash rate.
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EUR/USD - Traders Doubted Mr. Draghi
The EUR/USD rallied ahead of the European Central Bank’s policy meeting and the pair was also bolstered by comments issued on Wednesday by Federal Reserve Chairperson Yellen, who focused on the weakness of the U.S. Employment sector. And it continued to trade to the upside and hovered near an eight-week high on the likelihood that the European Central Bank would refrain from taking steps to improve Inflation. And once the announcement was published, The EUR/USD continued its rally. The central bank left monetary easing unchanged and kept the key cash rate at 0.25 percent. Policy makers also indicated that they will not alter the deposit facility rate and will remain at 0.75 percent. ECB President Mario Draghi reiterated that any further appreciation of the Euro could trigger a change in policy.
GBP/USD - BOE Opts For No Changes
The GBP/USD remained close to a five-year high even as the Bank of England stated that it will not raise the benchmark interest rate at present, and will leave stimulus at 375 billion Pounds. Anticipation for a rate hike caused the British monetary unit to surge against the greenback, and it was supported by the solid economic releases issued in the past few weeks. Reports released on Thursday showed that House Prices in the U.K. dipped in April, easing worries over a possible bubble. The official metrics indicated that prices slipped 0.2 percent last month, but according to Halifax, a Mortgage lender, values climbed 8.5 percent in the months of February to April. Demand for the Sterling remained high especially as traders predicted the European Central Bank would not implement any new measures.
USD/JPY - Russia Attempts To Ease Tensions
The USD/JPY eased slightly while the markets kept a close eye on the situation between Russia and the Ukraine. Tensions appeared to be easing after Russia’s President Putin stated that he would do his best to calm the situation. But still, many investors preferred to stick to safe havens, causing the pair to decline. Bank of Japan Governor Haruhiko Kuroda indicated that policy makers are considering the possibility of expanding stimulus, although not at present, since the latest reports have pointed to economic improvement. The markets reacted positively as Mr. Putin told militants in the Eastern region of the Ukraine that the general elections to be held on May 25th were a move in the right direction. Japanese officials continue to digest comments by the Organization for Economic Cooperation and Development which stated that Japan’s economy may expand less in 2014 than previously anticipated.
AUD/USD - Australia Posts Economic Improvement
The AUD/USD surged to the highest level in three weeks as Thursday’s releases confirmed that the number of payrolls climbed by 14,200 in the past month, surpassing forecasts for an increase of 6,800. Furthermore, March’s data was modified to show that employers hired 22,000 workers rather than the previously announced 18,100. The announcement indicated that the country’s level of Unemployment stayed at 5.8 percent and did not go up to 5.9 percent as expected. The pair was also supported by stellar news out China, its main trade partner, which said that imports and exports climbed, brightening the prospects for those economies in the South Pacific.
Today’s Outlook
Today’s economic calendar shows that the E.U. will report on the German Trade Balance. The U.K. will release Industrial and Manufacturing Production as well as the Trade Balance. And the U.S. will issue NIESR GDP Estimates.
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