Investors benefitted from the greenback's rally on Tuesday and retrieved their gains. Soon after, the U.S. Dollar slumped against the majority of its Forex peers, especially as no key U.S. economic reports were published. On Tuesday, the Commerce Department revealed that Orders for Durable Goods sustained a rather impressive hike, and Consumer Confidence rallied to the highest level since 2007. According to the Conference Board, the index which gauges sentiment among consumers climbed to 92.4 in August, after posting at 90.3 in July. The numbers reflect optimism over the recovery of the U.S. economy.
On the commodities front, market traders are anxiously awaiting the new month, during which time Gold has traditionally performed well. According to experts, gold has averaged rallies of 3 percent every September for the past two decades, surpassing November, when prices usually advance 1.8 percent. Physical demand is predicted to go up as India starts the celebration of its local festivals and it's forecast to remain high as wedding season in India starts soon thereafter. Sources say that consumers observe the custom of purchasing gold for the brides' trousseaus as a wedding present. Futures for December delivery went up 0.13 percent during the European market hours and traded at $1,286.90 a troy ounce on the New York Mercantile Exchange.
The Euro strengthened against the U.S. Dollar, but remained under pressure subsequent to the announcement of less than stellar data out of Germany, increasing the possibility the European Central Bank may have to step in to ensure deflation doesn't take roots. And despite a lack of economic fundamentals and light trading, the British Pound erased some of its losses.
The Yen on the other hand traded flat given the heightened tensions in the Ukraine. Metrics issued on Tuesday out of the U.S. denoted that the world's biggest economy is gaining momentum; however, worries about negotiations between Russia and the Ukraine continued to bolster risk aversion in the money market.
The New Zealand Dollar rose against the greenback as Consumer Prices went down, but a further decline in dairy product prices reignited concerns. Australia's Dollar advanced versus its U.S. peer shrugging off domestic news which pointed to a drop in Construction Work during the months of April to June.
EUR/USD- Investors Profit From Decline
The EUR/USD inched higher on Wednesday as investors took advantage of the pair's decline to gather profits before the U.S. reports on Gross Domestic Product and the Euro region's central bank begins its policy meeting. Speculators anticipate that this week's releases could show a further drop in inflation, and suspect that if that's the case, the monetary authorities won't hesitate to implement the needed measures. On the data front, Germany divulged that the Gfk Consumer Climate Index dipped this month from 9.0 to 8.6, while analysts predicted it would stay unchanged. The EUR/USD rose after Germany's Finance Minister, Wolfgang Schaeuble said that the markets have over-assessed Mario Draghi's statements about the need for Euro-bloc nations to adhere to strict fiscal measures.
GBP/USD- Light Trading In The Forex
Even though trading volume remained subdued on Wednesday, the GBP/USD rallied. There were no economic announcements out of the U.K. or the U.S. but investors kept an eye on the crisis in the Ukraine in an effort to assess risk appetite. The British currency has been under pressure ever since the Bank of England suggested this is not the ideal time to consider raising the borrowing costs. Recent policy meeting minutes divulged that only two of the policy makers agree with increasing the benchmark interest rate. But economists say that the lag in salaries and the slowdown in inflation have given the monetary authorities food for thought. Metric released on Tuesday revealed that Mortgage Loans were at the lowest level since the start of the year due to the tightening of loan programs, which, according to analysts, were implemented to help cool off the over-heated real estate sector.
AUD/USD- Construction Drops
The AUD/USD traded mixed despite the disappointing data issued out of Australia. Official reports showed that Construction activities went down in the second quarter, by 1.2 percent. Construction work had posted another drop in the initial quarter of 0.4 percent, a figure which was modified after reports indicated a 0.3 percent increase. The data did not please investors, since economists predicted a drop of 0.3 percent while stating that the overvalued Aussie is beginning to have a negative impact on the economy and may lead to a slowdown in payroll creation for the next four years. They also suggested that the boost the economy needs to stabilize itself is a boom in the mining sector, but that's not likely to happen.
EUR/JPY- Euro Eases a Few Pips
With the rekindling of the possibility that the European Central Bank may implement more measures to avert deflation, the EUR/JPY declined. Recent data out of Germany, the E.U.'s largest economy disappointed. And this has raised speculation that the policy makers will have to take the needed steps to ensure the economy doesn't take a turn for the worse. There was no data out of Japan, but some traders have moved away from risk assets in light of the fighting still happening in the Ukraine. Others have focused on statements issued by the Bank of Japan's Governor, Haruhiko Kuroda, wherein he intimated that stimulus may stay unchanged for a longer span of time. The EUR/JPY gained a few pips later in the day even as investors anticipate that Germany will show a stagnation in inflation for August. Meanwhile, the Gfk index which measures German Consumer Confidence plunged to the lowest level in almost two months.
Today's Outlook
Today's economic calendar reveals that the Euro region will report on the M3 Money Supply, Private Loans, Spanish GDP, and Business Climate. Consumer Confidence and Industrial Sentiment. The U.K. will issue data on the CBI Distributive Trades Survey and Gfk Consumer Confidence. The U.S. will publish Initial and Continuing Jobless Claims, GDP, Real Consumer Spending, Pending Home Sales and Corporate Profits. New Zealand will announce Building Consents. Japan will provide metrics on Household Spending, National CPI, Tokyo CPI, the Unemployment Rate, Retail Sales and Industrial Production. And Australia will release information on the Private Sector Credit.