Daily Report: EUR/USD, GBP/USD, USD/JPY And AUD/USD : September 17, 2014
iFOREX | Sep 17, 2014 04:28AM ET
The U.S. Dollar continued to enjoy high demand while traders waited for the Federal Reserve to conclude its two-day policy meeting. And as the meeting went on, traders increased speculation that the central bank will provide the markets with insight as to when it may decide to raise the interest rate. Some surveys revealed that a gradual increase will take place, even as the U.S. economy has shown improvement over the past five years. On the data front, the U.S. confirmed that Producer Prices stagnated in August, but on a year-over-year basis, they climbed 1.8 percent.
Gold Prices went up and futures for delivery in December traded at $1,240.79 a troy ounce on the New York Mercantile Exchange, denoting a 0.45 percent hike during the European Forex market hours. According to experts in the foreign currency exchange, traders are positioning themselves in preparation for the FOMC statement. Some analysts believe the shiny metal may decline as far as $1,200.00 an ounce should the greenback strengthen further. The shiny commodity surged during the American trading session on the likelihood that its decline to near an 8-month low would spur more buying.
The Euro, on the other hand remained close to the same level as it was on Monday versus the U.S. Dollar. Not even the ZEW reports managed to impact the 18-nation currency. The release showed a decline in German economic sentiment as a result of worries over the sanctions against Russia, and the effects they could have on the region's economy. The British Pound extended its drop against the U.S. Dollar and weakened against the rest of the majors after an announcement issued on Tuesday revealed that Consumer Price Inflation plummeted to match the lowest food prices seen in five years. Other news confirmed that the House Prices Index rose in July.
The Yen remained weak and came close to trading at the lowest trading rate in six years against the U.S. Dollar. The Japanese monetary unit was under pressure after Bank of Japan governor, Haruhiko Kuroda stated that policy makers are prepared to loosen policy or add new stimulus measures in order to meet the 2 percent inflation goals which have become difficult to reach. Mr. Kuroda suggested that another round of stimulus may be needed should the government go ahead with a second sales tax increase next year.
Lastly, in the South Pacific, Australia's Dollar depreciated against the greenback after the country's Reserve Bank issued the most recent policy meeting minutes, which reiterated the importance of maintaining the interest rate at the current percentage, and signaled that the economy could improve with the debasing of the monetary unit. New Zealand's Dollar also traded to the downside, as it was weighed down by the latest lackluster macroeconomic fundamentals issued by Chinese authorities, and the fact that the Finance Ministers of the G-20 reduced the growth outlook for the Euro-zone.
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EUR/USD- Sanctions May Hurt German Economy
The EUR/USD posted slightly fluctuations even though the ZEW Institute released data on Economic Sentiment. According to the institute's index, Germany's economic sentiment plunged from 8.6 to 6.9 in September. The reports showed that most investors are worried about the sanctions against Russia, and how they could dampen growth. Another release indicated that the gauge which measures Current Conditions slipped from 44.3 to 25.4. Sources say that Mario Draghi, the European Central Bank's President is working at rebuilding the economy by purchasing asset-supported securities. And many say that the world's regulators are prepared to give him the needed help. According to news, the International Organization of Securities Commission will offer its opinion on marketable securities to the finance Ministers of the G-20. The European economy appears to have stalled out, and the ECB is making sure it jump starts soon.
GBP/USD- CPI Pushes Sterling Down
The GBP/USD declined to a 10-month low subsequent to a report indicating that consumer prices went down to match the lowest grocery prices in five years. The pair depreciated on Tuesday after the Office for National Statistics showed that the annualized rate of inflation dipped to 1.5 percent in August, after printing at 1.6 in July. Analysts say that while consumers are enjoying the incredibly low prices at the supermarkets, they're still feeling the pinch of their wages not having gone up. Other economic announcements revealed that Core Consumer Prices excluding volatile items such as food climbed 1.9 percent. The news indicated that the House Price Index surged 11.7 percent in July, rather than the anticipated 10.6 percent. And even though the day for the Scottish Referendum is closing in, the financial markets remain optimistic. The U.K. is facing the likelihood of a break-up which could bring about higher debt and a slowdown in the flows of investments. Yet economists believe that the British economy will outperform that of other major countries.
USD/JPY- Yen At New Low
The USD/JPY inched closer to a six-year high on Tuesday as market traders assessed how soon the Federal Reserve could raise the costs of borrowing money. If the central bank goes ahead with a rate increase, it will be the first one since 2006. In the meantime, in Japan, Prime Minister, Shino Abe stated that he is not sure he will push for another sales tax increase. Before doing so, he will take into consideration what the economic indicators reveal. He added that the global economies need to contribute to the world's welfare. He suggested that the U.S. needs to invest in its infrastructure, and the euro region needs to complete a banking union; France needs to ensure its unemployment declines, and India has to simplify its tax system. The Bank of Japan's governor, Haruhiko Kuroda said that the central bank will add stimulus should it become necessary.
AUD/USD- Economy Needs Lower Value Currency
The AUD/USD plummeted following the release of the Reserve Bank's policy meeting minutes, but managed to rebound slightly soon thereafter. The bank intimated that the AUD remains "overvalued" despite sustaining a long streak of declines in the past week. The document showed that the currency is still too high for the central bank to accomplish its goals of obtaining a balanced economy. The AUD/USD has remained under pressure after China indicated that its industrial output slowed down dramatically in August, to the lowest reading since the start of the global financial turmoil. At a summit in Sydney, Christopher Kent, the RBA's Assistant governor issued comments in which he suggested that a further drop of the AUD/USD would be quite beneficial for Australia's economy.
Today's Outlook
Today's economic calendar shows that the U.K. will report on Claimant Count Change, the Unemployment Rate and Average Earnings. The Euro region will release CPI, Core CPI, and Spain's Trade Balance. Switzerland will publish ZEW Expectations. The U.S. will announce MBA Mortgage Applications, CPI, Core CPI, Current Account, the Fed Funds Target Rate, the FOMC Statement and FOMC Economic Projections. New Zealand will provide data on GDP. And Japan will offer the Trade Balance and Adjusted Trade Balance.
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