iFOREX | Aug 19, 2013 03:12AM ET
The U.S. Dollar gained against the majority of its forex counterparts after better than anticipated economic reports fueled speculation that the Federal Reserve may take the data into account and decide to slow down stimulus by as soon as September. The Dollar Index also rebounded as the Labor Department indicated that Jobless Claims fell to the lowest level in 6 years. But not all releases were positive; The University of Michigan said that the Consumer Sentiment Index dipped to 80.0 in August after posting a six-year high of 85.1 in July. This raised doubts among investors and fueled concerns over just what key policy makers will decide when they meet next month. In the meantime, mounting concern over the future of monetary policy contributed to a major jump in Gold Futures. This, together with news that physical demand for the precious metal went up in Asia, prompted Gold prices to touch an eight-week high. Futures for delivery in December settled at $1,374.64 on the Comex Division of the New York Mercantile Exchange.
In the Euro region, market investors felt optimistic subsequent to a week of solid data confirming that the recession has ended. However, investors remained cautious before the publication of metrics relating to manufacturing, scheduled to be released during the days ahead. The buoyancy in optimism came about as Eurostat announced that the E.U.’s economy widened by 0.3 percent in the second quarter, which was driven by the powerhouse economies of Germany and France. Officials also explained that the rise in exports helped Spain and Italy sustain smaller contractions than anticipated. The Euro rallied versus the Yen, despite news confirming that the Japanese economy also expanded, although at a slower pace than forecast. The British Pound traded close to two-month highs against the greenback after official metrics out of the U.K. on Retail Sales and Employment bolstered appeal for the Sterling and improved the outlook for its recovery. The Swiss Franc dipped versus the U.S. Dollar and the Euro as positive news out of the Euro-zone increased risk appetite and ebbed demand for refuge.
The Yen erased prior gains against the greenback on uncertainty over the Fed decision on monetary easing, which is expected in September. Fed Chairman Ben Bernanke made it clear that the central bank would not begin reducing stimulus until the economy shows true signs of improvement. In the meantime, official releases out of Japan confirmed that the economy grew, though at a slower rate than expected. Investors will now keep an eye on what Prime Minister Shinzo Abe will decide on sales taxes, as many economists believe that an increase would be bad for the recovery of the nation’s economy. The Yen slipped versus the Euro at the end of last week.
Lastly, the Australian Dollar rose versus the U.S. currency amid concerns over U.S. monetary policy; and the New Zealand Dollar reached a nine-week high versus its U.S. counterpart after days of positive reports denoting an increase in Retail Sales and Core Retail Sales. In the days to come, speculators will shift their attention to China’s economic reports which are expected to reveal the manufacturing output, a factor that usually affects the two South Pacific monetary units.
EUR/USD-The Longest Recession
The Euro rallied against the U.S. Dollar after economic data provided evidence that the Euro region has finally pulled away from “the longest recession in history.” The data, which denoted an expansion of GDP of 0.3 percent in the second quarter, followed releases revealing a jump in Chinese imports and exports, thereby fueling speculation that world economies are stabilizing. In the week ahead, Germany will report on Producer Price Inflation, a leading economic indicator; and the Euro-zone will issue metrics on the services and manufacturing sectors. While the Euro gained, it did not surpass the level at which it started early in the week. Aside from the slowdown in volatility which occurs every summer, uncertainty over the future of the U.S. and European economies prompted the currency’s advances to be limited. Better than predicted figures on Current Account failed to boost the Euro; however, analysts predict that Manufacturing figures may help give a boost to the shared currency. Therefore, the outlook for the European economy depends on what this week’s PMI reports will show.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.