iFOREX | Jul 10, 2013 06:43AM ET
The U.S. Dollar traded remarkably higher against the Euro and the British Pound after the International Monetary Fund issued its growth forecasts for the major global economies. According to the IMF, the U.S.’s economy may only expand 1.7, rather than the previously indicated 1.9 percent. And for 2014, the IMF believes the U.S. economy may only grow 2.7 percent instead of the 3 percent initially suggested in April. Despite the bearish outlook, demand for the greenback remained strong as investors believe the Federal Reserve may begin tapering off on stimulus, should the economy continue to show signs of improvement. Today, all eyes will shift to the Federal Reserve Chairman, Ben Bernanke, who’s scheduled to deliver a speech on monetary policy. Risk appetite ebbed in the market as the International Monetary Fund added that the emerging markets won’t see as much growth while global growth may only amount to 3.8 percent, rather than the 4 percent previously projected. In its report, the Fund recommended that the U.S. augment its debt ceiling while Europe needs to do whatever is required to prevent “financial fragmentation.” Gold Prices rallied for a second consecutive day as China reported increases in Inflation, which fueled appeal for the precious metal as a hedge, and as demand for gold jewelry rose. According to the Bureau of Statistics, the Chinese Consumer Price Index climbed 2.7 percent from the previous year.
The Euro fell to three-month lows against the U.S. currency after an official from the region’s central bank suggested that policy makers plan to adhere to “accommodative policies” for at least one year. The shared monetary unit slumped against the majority of its counterparts after Reuters reported that Executive Board Member of the ECB, Joerg Asmussen, suggested the bank was considering leaving the key cash rate unchanged. The British Pound also traded lower against the greenback subsequent to lackluster economic releases which cast doubts on the improvement of the nation’s economy. According to official figures, Factory Output declined, Industrial Production stagnated, and the Trade Deficit expanded. The Sterling remained under pressure despite positive figures which revealed that Home Prices climbed to the highest since the beginning of 2010, and Retail Sales increased.
The Yen dipped to six-week lows against the greenback as the American currency continued to enjoy high demand amid speculation the Federal Reserve may start scaling back on the monthly asset purchases. The Japanese currency remained weak despite news indicating that four major companies applied for permits to re-start ten nuclear reactors in an effort to reduce the nation’s dependence on energy imports. The Yen continued to trade to the downside despite positive reports which showed that the country posted a Current Account surplus for a fourth month in a row in May. The Surplus stood 58.1 percent higher than the previous year as it rose 100.8 percent in the month of April.
Lastly, in the South Pacific, Australia’s Dollar rallied for a second consecutive day versus the greenback on concerns that speculation against the currency as excessive. The Aussie erased some of its gains after Asian stocks surged subsequent to the release of Chinese Inflation data, and as domestic news indicated that Business Conditions fell to the lowest since May of 2009. The New Zealand Dollar advanced versus its U.S. peer as figures revealed that Business Confidence improved, reaching the highest level in close to four years.
EUR/USD- Euro Drops On IMF Forecasts
The Euro slumped to three-month lows against the greenback after the International Monetary Fund reduced its global growth forecast for this and next year. The IMF indicated that the Euro region’s economy may shrink by 0.6 percent rather than the 0.4 percent previously anticipated. The shared currency remained under pressure as the European Central Bank signaled it may leave the benchmark interest rates at the current low. Today, investors will pay close attention to data out of Italy and France relating to Industrial Production.
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