The U.S. Dollar depreciated against several majors, including those considered to be harbor currencies, as turmoil in the Ukraine escalated over the weekend, suggesting that the possibility of a civil war could become a reality. While Ukrainian forces attempted to dislodge rebels from the industrial region of the country, violence erupted in Odessa, a town that many refer to as the door to the Black Sea. Forces situated in Donetsk, close to the border with Russia recaptured a television tower, which was previously seized by Russian troops. Investors await the delivery of the “state of the economy” by Federal Reserve Chairwoman, Janet Yellen, and hope to obtain clues on when the central bank may decide to boost the interest rate. The greenback was also weighed on by news out of China indicating that the Manufacturing sector remained below 50, denoting no growth. And as tensions between Russia and the Ukraine rise, Gold Prices climbed the most in three weeks, sustaining the largest advance in one month. Futures for delivery in June traded at $1,312.10 a troy ounce on the Comex Division of the New York Mercantile Exchange; and bullion for immediate delivery reached $1,312.19 in Mumbai.
The Euro remained more or less unchanged against its U.S. peer on Monday even as trading volume was thin. The Euro disregarded regional economic fundamentals revealing that Investor Confidence dipped in May. The bad news came from the European Commission, which downgraded the region’s growth forecast from 1.8 to 1.7 percent for 2015, and added that the economy may only expand 1.2 percent this year, as the crisis between Russia and the Ukraine could have a negative effect on the E.U. The British Pound remained at a four-year high against the greenback as a result of recent economic data showing that the economy continues to gather momentum. The British market was closed on Monday for Bank Holiday.
The Yen climbed against the greenback as demand for safety increased due to concerns that the mounting violence in the Ukraine could escalate into a full-blown civil war. Meanwhile, the Bank of Japan’s governor, Haruhiko Kuroda, indicated that the economy is on the right course and continues to improve. The Japanese monetary unit rose the most in two weeks as China stated that its Manufacturing sector did not grow as expected.
Lastly, New Zealand’s Dollar slipped to the downside against the greenback after China disappointed with less than stellar private reports which showed that the HSBC Manufacturing Purchasing Manager’s Index read at 48.1, rather than the expected 48.4. The Australian Dollar was also impacted by the data out of China, its main trade partner, but it steadied against the U.S. currency following mixed domestic reports.
EUR/USD - Commission Warns About Deflation
The EUR/USD traded steady during subdued market conditions on Monday, and shrugged off the rather negative news which revealed that the Sentix Index, which measures the region’s Investor Confidence, dropped in May from 14.1 to 12.8, missing forecasts for a hike to 14.2. Other announcements denoted that Producer Prices plunged 0.2 percent in March. The latter news supported the European Commission’s view that further decline in prices could become a major problem for the region, just twelve months after it managed to emerge from the debt crisis. The Commission suggested that energy prices may dip to the downside even further and while output remains low, the employment sector wasn’t likely to recover.
GBP/USD - Markets Closed For Holiday
The GBP/USD rallied to more than a four-year high on data revealing that the U.K. economy has gathered momentum, but it slipped slightly after economic releases out of the U.S. confirmed that more payrolls than estimated were created in April. However, recent economic reports such as the one issued on Thursday showing that Manufacturing activities rose at the quickest pace in five months boosted speculation that the Bank of England may not wait to increase the benchmark interest rate. The U.K. will issue data on the Services sector this week.
USD/JPY - Economy Remains On Track
The USD/JPY tumbled as the markets sought safety in light of the crisis in the Ukraine. The USD/JPY plunged further on Monday while investors await the Federal Reserve’s Chairwoman, Janet Yellen, to address lawmakers. Mrs. Yellen will offer the outlook to the Economic Committee of Congress. Meanwhile, China announced that the Manufacturing Sector sustained a minor improvement but remained below 50. The Yen continued to gather strength after Haruhiko Kuroda, the Governor of the Japanese central bank, commented that the economy’s recovery is on the right path, reducing speculation for an expansion in stimulus for now.
AUD/USD - Aussie Weighed Down By Data
The AUD/USD steadied despite lackluster macroeconomic fundamentals out of China indicating that the HSBC Manufacturing PMI printed at 48.1, while analysts expected to see it at 48.4. Aussie releases confirmed that Building Approvals fell 3.5 percent in March, and February’s numbers were modified to show a decline to 5.4 percent rather than the previously announced 5 percent. Other news revealed that advertisements for employment positions surged 2.2 percent last month, following a 1.4 percent hike in March.
Today’s Outlook
Today’s economic calendar shows that Japan’s markets are closed for a holiday. Australia will issue the Interest Rate Decision and RBA Statement as well as Retail Sales. The Euro region will report on Services PMI and Retail Sales. The U.S. will publish the Trade Balance. New Zealand will announce Employment Change and the Unemployment Rate. And China will provide data on HSBC Services PMI.