Daily Report: EUR/USD, GBP/USD, EUR/JPY And NZD/USD : July 31, 2014
iFOREX | Jul 31, 2014 05:16AM ET
The U.S. Dollar extended gains against most of the majors while market investors awaited preliminary reports on U.S. economic growth for the second quarter, as well as the Federal Reserve's policy meeting outcome. The greenback benefitted on Tuesday from stellar economic releases which showed that Confidence has risen among consumers, while reaching the highest level since 2007. The greenback remained strong after official announcements denoted that the U.S. economy expanded at an annual pace of 4 percent in the year's second quarter, surpassing forecasts for Gross Domestic Product to come in with an increase of 3 percent. The news also revealed that the economy shrank by 2.9 percent in the initial quarter due to the harsh winter conditions. In addition, the private firm, ADP stated that Non-Farm Private Employment climbed by 218,000 payrolls in July, missing forecasts for a hike of 230,000. And the economy saw the creation of 281,000 jobs in the past month.
Gold Prices remained more or less unchanged after posting two days of declines. The shiny metal hovered near a one-week high while the world's markets continued to monitor the crises in the Middle East and the Ukraine, and as they weighed the possibility that the Federal Reserve may boost the interest rate soon. The U.S. Central Bank concluded its two-day policy meeting and all eyes were on the monetary authorities to obtain information on the future of U.S. policy. Meanwhile, the Euro region's leaders indicated that they will now apply more pressure on Russia by targeting its banks, oil and military industries. Gold for delivery in December reached $1,300.90 a troy ounce on the Comex; and bullion for immediate delivery traded at $1,299.64 in London.
The Euro slumped further against the greenback and many of its Forex counterparts as the E.U. announced it would prevent Russia from accessing its banking system. The strict sanctions are expected to curb Russia's President, Vladimir Putin, from giving support to the rebels. Elsewhere in the Forex, the Swiss Franc sustained a big decline against the U.S. Dollar subsequent to lackluster domestic data which confirmed that the KOF barometer which measures activities in the economy dropped from 100.5 to 98.1 this month, missing forecasts for a hike to 101.0. The British Pound traded near the lowest rate in one-and-a-half months against the U.S. Dollar, though experts predict that the Sterling could regain its footing and resume its upward trend. The British monetary unit has advanced 11 percent versus the greenback in the last year, the most among 30 major monetary units. And it has rallied 12 percent against nine of the currencies in the developed markets. The International Monetary Unit indicated that its External Stability Report shows that the currency is overvalued by 10 to 15 percent.
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The Yen dipped against the U.S. Dollar following what many called a soft Industrial Production report. The release indicated that June's Industrial Output plummeted at the quickest pace since Japan was affected by the Tsunami in 2011. Companies have decreased their production to offset the increase in inventories. However, most manufacturers expect to see improvements in the coming months as the effects of the sales tax boost fades.
The Australian Dollar dipped to the downside against its U.S. peer as the markets waited for the FOMC statement. New Zealand's Dollar, on the other hand rose against the greenback after macroeconomic fundamentals revealed that Building Consents went up in June after posting a drop in May.
EUR/USD- ECB May Raise Stimulus
The EUR/USD fell ahead of the Federal Reserve's rate statement and as experts predicted that the Dollar Index would sustain the largest monthly advance in over one year before the central bank released it policy decision. Both the U.S. and the E.U. announced new sanctions against Russia for its involvement in the Ukraine. And in the Euro-zone, most economists believe that more stimulus is needed if the European Central Bank hopes to attain its growth goals and stave deflation. Today, the Euro region will release key economic metrics on consumer prices. The EUR/USD remained near the lowest rate in eight months after the U.S. announced that Gross Domestic Product rose at a yearly rate of 4 percent in the months of April through June.
GBP/USD- Sterling Dips As Dollar Strengthens
The GBP/USD dropped as positive expectations that the world's biggest economy would show growth for the second quarter fueled the appeal for the greenback. Recent metrics have confirmed that the U.S. economy is rebounding, but many analysts predict that the GBP/USD could reverse its downward trend. The GBP/USD was also impacted by demand for harbor assets brought on by the escalation of tensions in the Middle East. The pair remained to the downside despite stellar news confirming a hike in Mortgage Approvals in the U.K. The official data showed that the Bank of England approved 67,196 home loans in June, more than the 62,007 approved in May. This was the first surge since the start of 2014.
EUR/JPY- Production Dips Dramatically
The EUR/JPY rose slightly subsequent to the publication of disappointing Industrial Production figures out of Japan, which revealed that activities in the Industrial sector went down dramatically as the companies had a surplus of inventory. Official announcements denoted that production plunged 3.3 percent in June, while economists anticipated a drop of 1.2 percent. Many analysts suggest that the economy may struggle to recover due to the increase in the sales tax back in April. Most of the experts say that the Gross Domestic Product may show a contraction for the second quarter. They predict that the economy could post growth of 0.6 percent, but if consumer spending remains low, the forecast may prove to be high. The EUR/JPY remained under pressure after the Euro region reported its plans to implement the most stringent sanctions up to date against Moscow.
NZD/USD- Building Consents Go Up
The NZD/USD rallied following stellar releases reflecting a hike in Building Consents. The pair recovered from Tuesday's drop brought on by announcements that Fonterra, the largest dairy exporter reduced its forecast for payouts in 2015. According to reports, Building Consents jumped 3.5 percent in June, following the decline of 4.6 percent held in May. And according to sources, the Kiwi may be set for an intervention as the Reserve Bank indicated that it remains overvalued. Mr. Graeme Wheeler, the bank's governor intimated that the weakening of the commodities could be the result of the high valued Kiwi. He added that the New Zealand Dollar may sustain a big decline since its value is "unjustified" as well as "unsustainable."
Today's Outlook
Today's economic calendar shows that Japan will report on Construction Orders and Housing Starts. The Euro region will issue data on Core CPI, CPI, and the Unemployment Rate. The U.S. will publish Initial and Continuing Jobless Claims, and Chicago PMI. Australia will reveal the AIG Manufacturing Index and PPI. And China will divulge metrics on HSBC Manufacturing PMI as well as Manufacturing PMI.
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