Daily Report: EUR/USD, GBP/USD, XAU/USD And USD/JPY : September 30, 2014
iFOREX | Sep 30, 2014 05:04AM ET
The U.S Dollar traded remarkably stronger against the majority of its counterparts following Friday's announcements by the Commerce Department which confirmed that the U.S. economy grew by 4.6 percent in April through June, rather than the previously stated 4.2 percent. In addition, the Dollar Index rose for another month, making this the 11th consecutive rally of the Index which measures the performance of the greenback versus that of six other monetary units. Optimism reigned in the market as investors believe that the latest releases may provide sufficient evidence for the Federal Reserve to consider a benchmark interest rate hike in early 2015. Monday's news divulged that Personal Spending in the U.S. went up 0.5 percent in August, surpassing forecasts for a 0.4 percent hike. Personal Income deriving from salaries, investments and assistance from the government jumped 0.3 percent in August, after rising 0.2 percent in July.
Gold erased earlier losses as protests in Hong Kong prompted a drop in the Nikkei's equities and raised demand for harbor assets like the precious commodity. Sources say that protesters, who favor democracy clashed with police, causing the closure of the financial district.
In the Euro region, investors awaited the outcome of Thursday's policy meeting. Analysts predict that the Euro could depreciate further and perhaps reach as low as $1.2000 since the central bank has suggested the decline of the Euro could benefit exporters. The Euro slumped to a fresh low against the greenback, but stabilized later in the day following a volatile week. Still, the shared currency slipped to the lowest level since September of 2002. Last week's announcements out of Germany highlighted the weakness of the Euro-zone's economy; and on Monday, reports divulged that the region's Consumer climate plummeted to the lowest reading since 2014. In addition, Import prices posted a major drop, while Germany's Business Climate weakened for a fifth month in a row. With Germany, the periphery's largest economy posting such dire fundamentals, economists worry that the region may continue to deteriorate. The British Pound traded little changed as the U.S. Dollar remained supported by demand. In the coming days, the U.K. will issue data on activities in the Manufacturing and Services sectors.
The Yen traded weaker against the U.S. Dollar although the Japanese currency obtained some support from demand for harbor assets. This change came about following news from Hong Kong, where protestors took to the streets, causing disturbances that ended in the closing of the financial hub of the city. Prime Minister, Shinzo Abe provided some support for the Yen as he unveiled new economic reforms. These include the revision of the pay system. The Yen traded at a two-week high versus the Euro and is expected to dip further should the protests continue. Analysts say that if the anti-China protestors increase tensions, Asia may lose its appeal as an investment area.
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And the New Zealand Dollar plunged to a one-year low as Prime Minister John Key supported the RBNZ's decision to interfere once again in the market in an effort to cause the currency's devaluation. The Kiwi tumbled by as much as 2 percent, and was set to show the largest three-day plunge since 2011 once the Reserve Bank reported the sale of NZD$521 million in domestic currency last month. Australia's Dollar traded at an eight-month low versus the U.S Dollar subsequent to upbeat macroeconomic news issued on Friday.
EUR/USD- Consumer Climate Plummets
Decline in risk appetite prompted by protests in Hong Kong caused the EUR/USD to decline on Monday. However, this isn't the only factor weighing on the shared currency. The EUR/USD slipped after reports showed that GfK Consumer Climate plunged to 8.3, the lowest reading so far this year. Other news revealed that Import Prices dropped. Germany announced that the IFO Business Climate came in with disappointing figures for a fifth consecutive month, spurring serious concerns over the outlook for the entire Euro region. In the past few days, the pair lost ground after Mario Draghi, the head of the European Central Bank delivered a speech in Lithuania, reiterating the policy makers' commitment to introduce unconventional measures for the protection of the Euro and the EU.'s economy. Economists anticipate a major drop for the Euro exchange rate since Mr. Draghi has spoken of growing the bank's balance sheet. Sources say that the details will be revealed at the next summit which will take place in Naples, Italy. At said time, the governing council may unveil new measures. The EUR/USD traded at $1.2664 at the start of the week, the lowest rate since November of 2012.
GBP/USD- Rate Hikes In Focus
The GBP/USD traded lower after Mark Carney, the governor of the Bank of England, stated that the point at which the key cash rate could start to normalize is near. Sources have indicated that the central bank may be preparing to boost the benchmark interest rate, as a number of sectors of the economy appear to be achieving stability. The GBP/USD traded little changed later in the day following releases out of the U.K. revealing that Mortgage Approvals plunged by more than expected in August, dipping from 66,100 to 64,212. The announcement showed that Net Lending climbed 2.3 billion Pounds, but Business Loans posted a small decline, perhaps the smallest since 2012.
XAU/USD- Gold Rises On Protests
The XAU/USD rallied in New York's Mercantile Exchange as equities around the globe took a tumble on higher demand for safety. The MSCI all Country World Index posted a 0.2 percent decline after Hong Kong's Sang Index fell subsequent to pro-democracy protests which turned violent. Protestors are unhappy, and demand less intervention from China's government. Futures for December delivery surged 0.7 percent by the early morning hours in New York, and reached $1,223.70 a troy ounce. Analysts are predicting that if the situation worsens, the shiny metal could rally further. Reporters have explained that the main issue of the protests has to do with the agreement that the U.K. and China struck in 1997 over the sovereignty of Hong Kong. The two nations agreed that except for security and defense, Hong Kong would maintain its political structure for a minimum of 50 years. At this point, the fight is about the elections scheduled for 2017 as pro-democracy protestors oppose Beijing having a say on who gets to run in the elections. The protestors believe that the people should have a say in who they nominate for the position of Chief Executive.
USD/JPY- Risk Aversion Helps Yen
The USD/JPY remained at a six-year high, though a shift in risk appetite in the Forex prompted the Yen to rebound slightly. The nation's Prime Minister, Shinzo Abe announced new measures which will include a series of economic reforms. For starters, the seniority-based wage structure will be looked into. Experts say that this sector has hurt the economy. Market participants treaded cautiously ahead of key economic fundamentals out of Japan, as they anticipated that these would bring about an increased volatility. Some analysts say that Japans inflation remained high and Tokyo core CPI, which measures consumer inflation, printed a hike of 2.6 percent, slightly below the predicted 2.7 percent. National Core CPI met forecasts.
Today's Outlook
Today's economic calendar shows that Japan will report on Construction Orders, Housing Starts and Tankan Big Manufacturing Outlook Index. The U.K. will provide data on Nationwide HPI Business Investment, Current Account and GDP. The Euro region will release German Unemployment, French PPI, as well as the E.U.'s CPI and Unemployment Rate. The U.S. will announce Chicago PMI and CB Consumer Confidence.
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