Daily Report: EUR/USD, GBP/USD, USD/JPY And NZD/USD : November 24, 2014
iFOREX | Nov 24, 2014 04:41AM ET
The U.S. Dollar concluded the past week at a lower price versus the Yen, but rallied against many other Forex majors as speculators and Hedge Funds boosted wagers that the greenback may extend its rally well into 2015 against most currencies. The U.S. Dollar gained over nine percent versus the Euro since the end of June, and touched a seven-year high against the Yen. The markets are extremely optimistic about the world's biggest economy although they still foresee a number of hurdles the economy will have to overcome before the Federal Reserve raises the benchmark interest rate.
Gold Prices soared to the highest level in three weeks on speculation that China's recent decision to lower the lending and key cash rates will boost demand for a number of commodities. The news prompted a hike in metals, including gold. Futures for delivery in December went up to $1,207.60 a troy ounce on the New York Mercantile Exchange, before dipping to $1,197.70 at the closing of trade on Friday. For the week, the shiny metal surged 1.01 percent. Despite the commodity's performance at the end of last week, investors predict its decline in the months ahead as the U.S. economy appears to be improving; a factor that could convince the central bank to boost the borrowing costs.
In the Euro region, the outlook on slow growth remains unchallenged. In a conference in Frankfurt, the President of the European Central Bank, Mario Draghi indicated that policy makers could expand stimulus should inflation stay at the current low or dip even further. The current plan includes the purchase of asset-supported securities as well as covered bonds. The Euro plunged against the greenback and the Yen.
The Swiss Franc declined versus the Euro, thereby raising speculation that the Swiss National Bank may have bought more Euros in the last few days in order to protect the 1.20 per Euro limit. On November 30th, the Swiss will go to the polls to vote yes or no on a referendum calling for the central bank to boost its gold reserves. The head of the bank, Thomas Jordan has expressed concerns and has said that a "yes" vote could dampen economic growth.
The British Pound weakened against its U.S. peer and traded at the lowest rate in fourteen months on speculation that the Federal Reserve could be close to raising the cost of borrowing money. The Sterling traded to the downside and remained under pressure after the Bank of England published its quarterly report in which policy makers suggested that the recent bounty of macroeconomic fundamentals signal that this isn't the time to raise the benchmark interest rate.
In Japan, the data issued last week revealed a major hike in Exports. The Yen traded mixed against the greenback but dipped to a seven-year low after the nation's Premier, Shinzo Abe broke up Parliament and scheduled elections for December 15th.
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And the Australian and New Zealand Dollars rose after China confirmed its plans to implement lending rate cuts to reignite economic growth. The announcement came as a surprise for the markets, and showed that the People's Bank of China will now charge 2.75 percent for the one-year deposit rate, and 5.6 percent for the one-year lending rate. In the Minutes issued at the start of last week, the Reserve Bank of Australia reiterated its plans to leave the key cash rate unchanged while trying to stabilize the economy.
EUR/USD- Euro Remarkably Lower
The EUR/USD dropped dramatically on Friday as the European Central Bank's President, Mario Draghi stated that the policy makers are close to adding further stimulus to make certain the Euro-zone's economy is revitalized. The currency pair depreciated 1.9 percent and dipped to the lowest level in two weeks after Mr. Draghi stated that inflation forecasts are lower, but attempted to assure investors by saying that the monetary authorities won't allow the situation to worsen, and will take steps as quickly as possible. Mr. Draghi reiterated his pledge to boost inflation and the inflation outlook. Recent reports showed that the Euro region's inflation stood at 0.4 percent in October, well beneath 1 percent, and far from the bank's 2 percent target.
GBP/USD- Public Borrowing Climbs
The GBP/USD declined at the end pf Friday following a week of mixed macroeconomic fundamentals which supported speculation that the Bank of England may not raise the interest any time soon. In the reports, the U.K. showed that Public Borrowing came in above forecasts. The National Statistics Office revealed that Net Borrowing dipped to a seasonally revised 7.05 Billion Pounds for the months of July to September, after posting at 10.57 Billion in the second quarter. Economists had predicted it would print at 6.90 Billion. In addition, Retail Sales climbed more than predicted in October. The official announcements confirmed that sales went up 0.8 percent after dipping 0.4 percent in September. The GBP/USD extended losses last week when another member of the anti-E.U. Party won a second seat on Parliament.
USD/JPY- Elections To Be Held December 15
The USD/JPY dipped on Friday after reaching a seven-year high on comments by Japanese Finance Minister, Taro Aso, who suggested that the weakening of the Yen happened too fast. The currency pair began its decline last month, when the central bank caught investors off guard by announcing the expansion of monetary stimulus. Meanwhile, the country was elated by Prime Minister, Shinzo Abe's statement, indicating that the government will delay the second sales tax increase until late 2015, and will hold elections on December 15. After dissolving Parliament at the end of last week, Mr. Abe went on to promote his economic program which he says will reignite the economy. Metrics posted last week confirmed that Japan is now in a recession.
NZD/USD- Rate Cuts Boost Kiwi
The NZD/USD rose as Chinese officials surprised speculators by unveiling a plan to reduce the key cash rate by 25 basis points to 2.75 percent, and to lower the twelve-month lending rate to 5.6 percent. The announcement was a response to recent metrics which have pointed to the fact that China's economy has slowed down. The NZD/USD was affected in the past days by lackluster data showing that dairy prices plunged to the lowest level in more than five years. This highlighted concerns that a drop in dairy product prices could have a serious impact on farmer incomes, another issue that may hurt the domestic economy. This week, market traders will pay close attention to a number of announcements including Building Consents and Business Confidence.
Today's Outlook
Today's economic calendar shows that Japan's markets are closed for a Holiday. Switzerland will report on Employment Levels. The Euro region will issue data on German Business Expectations and the Business Climate. The U.S. will publish Services PMI. The Bank of Japan will release the Minutes from the last Monetary Policy Meeting. And New Zealand will post Inflation Expectations.
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