Daily Report: EUR/USD, GBP/USD, USD/JPY And XAU/USD : August 22, 2013
iFOREX | Aug 22, 2013 05:24AM ET
The Federal Reserve issued the minutes from its July monetary policy meeting as Chairman Ben Bernanke indicated that the central bank would not consider putting an end to the current quantitative easing program until at least the middle of 2014. Mr. Bernanke went on to say that this would only take place if U.S. Unemployment falls below 7 percent. The Fed Chairman also stated that the bank may cut the $85 billion in monthly purchases perhaps by the end of this year. The rate of Unemployment currently stands at 7.6 percent. The minutes indicated that should Unemployment dip below 7 percent, the Fed may increase the cost of borrowing money. The minutes also suggested that most members agreed that now was not the appropriate time to begin slowing down on the monthly purchases. The news prompted the U.S. Dollar to rally against most of the majors, and it continued to receive support as the National Association of Realtors revealed that Existing Homes Sales surged more than anticipated. According to official metrics, sales jumped 6.5 percent up to a 5.39 million annual rate in July, which was more than the 1.6 percent hike they expected. Meanwhile, Gold prices dipped subsequent to the release of the central bank’s minutes and fell further as other commodities declined.
The Euro slumped versus the U.S. Dollar following comments by the Fed Chairman Bernanke in which he suggested that the central bank would put an end to stimulus by 2014, depending of course on the conditions delineated in the minutes. The Euro had begun its decline even earlier, as the markets speculated over what the minutes would reveal. The British Pound, on the other hand, gained against the U.S. Dollar during the European trading session after the Confederation of British Industry stated that Industrial Orders climbed to a two-year high this month, providing further evidence that the U.K.’s economy was on the road to recovery. However, not all reports were positive. The Public Sector showed a deficit for July.
The Yen traded higher against the greenback for a short span, as the Japanese Nuclear Regulatory Authority evaluated the situation at the Fukushima Plant, and indicated it would raise the severity level, given the fact that contaminated water had spilled into the ocean. The Yen weakened against the greenback after the Federal Reserve released July’s policy meeting minutes.
Lastly, the Australian and New Zealand Dollars both slipped versus the greenback as traders remained cautious ahead of the publication of the Federal Reserve’s minutes. The two South Pacific currencies extended losses as investors increased speculation that a reduction in asset purchases by the U.S. central bank could prompt the funds to be sent outside of those countries offering high yields.
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EUR/USD- Euro Slumps On Fed Minutes
The Euro weakened against the U.S. monetary unit after economic releases out of the U.S. showed that the percentage of Existing Home Sales was much higher than economists had previously predicted. The metrics fueled hopes that the U.S. economy was gaining momentum to a point where the central bank will start cutting back on the monthly bond purchases. The Euro slumped further after the Federal Reserve issued the July minutes, which indicated that members of the FOMC did not feel the time was right to reduce stimuli. The Euro traded slightly higher against the Yen and the British Pound.
GBP/USD- Industrial Orders Increased
The British Pound received investor support even after the release of the Federal Reserve’s minutes, and despite the fact that the U.K. announced its first budget deficit in 3 years. The deficit came about as a result of an increase in government spending. According to the numbers, Net Borrowing posted at 488 million Pounds, while a year earlier, the U.K. showed a surplus of 823 million Pounds. The Sterling climbed as the Confederation of British Industry indicated that the Factory Orders reached their highest level in two years, and forecasts for the upcoming three months improved dramatically. The CBI Manufacturing gauge went from zero to -12 in July and the output predictions climbed from 15 to 25.
USD/JPY- Market Absorbs Minutes
The greenback surged against the Yen mere seconds after the release of the Federal Reserve’s minutes from its July meeting. The minutes suggested that the central bank remains on the same course and therefore will not deviate from the current program until Jobless Claims dip and Unemployment goes down below 7 percent. The Japanese currency had appreciated earlier in the day when the Nuclear Regulation Authority stated that it may have to raise the severity rating of radioactive contamination from one to three. The highest is seven and according to recent releases, contaminated water from the Fukushima plant has made its way into the ocean.
XAU/USD- Gold Dips Further
Gold prices dropped on Wednesday as the markets speculated over just what the Federal Reserve’s minutes would reveal. But according to analysts, the value of the shiny metal may rally again, should the political situation in Egypt worsen, as this would prompt traders to buy safe havens such as gold. Gold Futures for December delivery settled at $1,370.60 on the Comex Division of the New York Mercantile Exchange.
Today’s Outlook
Today’s economic calendar shows that the Euro region will issue Manufacturing and Services PMI. The U.S. will report on Initial and Continuing Jobless Claims. And Switzerland will release data on the Trade Balance.
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