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Daily Report: EUR/USD, GBP/USD, AUD/USD And EUR/JPY : August 06, 2014

Published 08/06/2014, 05:14 AM
Updated 09/16/2019, 09:25 AM

The U.S. Dollar remained strong before the release of key U.S. economic fundamentals, which were expected to substantiate the belief that the economy is gaining momentum. At present, most speculators anticipate that the Federal Reserve may increase the benchmark interest rate to at least 0.5 percent by next summer. The greenback continue to trade to the upside after upbeat news divulged that the Non-Manufacturing Purchasing Manager's Index jumped to the highest level in three years, posting at 58.7 for July, subsequent to the June release which came in at 56.0. Gold Prices rose, but continued to trade below the $1,300 level. Futures for December delivery jumped 0.29 percent to $1,292.70 a troy ounce during the European morning hours on the Comex. The value of the commodity remained within a tight range for most of Monday, and fluctuated between $1,288.30 and $1,293.50. The shiny metal has sustained a big selling pressure amidst forecasts that the central bank could boost the interest rate earlier than anticipated.

The Euro slumped further against several of its Forex counterparts after reports out of the Euro region spurred fears that the economy is slowing down. While releases out of Spain and Germany showed progress in the Services sector, Italy reported the contrary. The metrics issued out of Italy weighed on the Euro since its Services PMI had come in at the highest level since 2010 in June. In the Euro region, Services PMI rose, though slightly less than the preliminary reading. In the U.K., optimism reigned again. The British Pound rallied against the Euro and the U.S. Dollar as the metrics from the U.K. denoted an improvement in Services Output.

The Yen rose slightly, while the U.S. Dollar's advance was capped as the Treasury yields declined, days after the U.S. economy reported the addition of fewer than expected payrolls. The bond market managed to remain bullish while the markets await announcements from major central banks across the Euro region, the U.K. and Japan.

And the Reserve Bank of Australia announced that it will leave the key cash rate at 2.5 percent and added that it will keep the rate low in order to achieve a period of stability. Other publications showed that the Australian Trade Deficit shrunk in June. Despite the positive announcement, the Aussie remained little changed against its U.S. peer. New Zealand's Dollar traded steady after the greenback regained some of its appeal ahead of key macroeconomic fundamentals. The Kiwi had been trading lower due to disappointing reports out of China revealing that the HSBC Services PMI stayed at the 50 level; and as a result of a drop in commodity prices. Investors are keeping an eye on Fonterra Cooperative Group, the largest dairy exporter to see how it fares following a major decline in dairy prices. These important staples for the nation's economy reached the lowest level since December of 2012 at the last auction.

EUR/USD- PMI Released

The EUR/USD plummeted towards a nine-month low, though many Forex strategists say that the charts show a possible hike for the shared currency. The pair was affected by data out of the Euro region revealing that the Services PMI rose from 52.2 to 54.2 last month. The buoyant numbers made up for the lackluster metrics on Manufacturing, but they failed to ease investors who say that the economy appears to be losing momentum. Italy, which had reported stellar news regarding its Services output back in June, provided a different story. In July, Italy's Service's sector activities dipped from 53.9 to 52.8. Germany and Spain indicated increases in output, though France said that its numbers continued to post minimal improvement. In Portugal, the banking crisis seems to be under control. The Portuguese central bank rescued the lender Banco Espirito Santo, a decision that will help to protect many large investors. The bank announced that it will provide 4.9 billion Euros in financial assistance, though it will still leave small shareholders with losses.

EUR/USD

GBP/USD- Services Sector Grows

The GBP/USD advanced on Tuesday after Markit Economics said that the Purchasing Manager's Index, which measures activities in the Service sector rose to 59.1 in July, following June's 57.7 reading. The Bank of England is expected to leave monetary easing and the interest rates unchanged when it offers its decision this week. Analysts say that it's true the numbers showed a surge in activities, in fact at the fastest since 2013; however, the economy is not presenting a solid picture. Monday's macroeconomics indicated that Construction slipped to the downside, and still, the economy continues to offer signs of recovery.

GBP/USD

AUD/USD- Trade Deficit Contracts

The AUD/USD showed slight changes after the Reserve Bank of Australia announced that it would leave the costs of borrowing money at the present low of 2.5 percent, a move that most market traders anticipated. The positive news came from domestic releases which confirmed that the Trade Deficit contracted from AUD$2.04 billion to AUD$1.68 billion in June. Following the bank's decision, the RBA's governor, Graeme Wheeler suggested that policy makers would like to maintain a period of stable borrowing costs. But the AUD/USD was not boosted by the stellar fundamentals. It remained under pressure after Chinese reports denoted that the Services sector has lost momentum and touched the lowest level since the end of 2005. Analysts explain that the disappointing numbers could be the result of the slowdown in the real estate market.

AUD/USD

EUR/JPY- Pair Stagnates

The EUR/JPY traded flat on Tuesday as speculators anxiously await the rate statement from the European Central Bank and the Bank of Japan. The Japanese central bank's governor, Haruhiko Kuroda will speak on Friday and he's expected to say that the domestic economy will grow by less than previously anticipated. Economists say that with Industrial Output slumping 3.3 percent in June, the most since March 2011 when the nation suffered through an earthquake and tsunami, it's likely that the bank will lower its growth forecasts. Furthermore, shipments overseas have fallen dramatically, even though the Yen has depreciated. The Euro remained under pressure as recent reports added to evidence that the region's economy is fragile.

EUR/JPY

Today's Outlook

Today's economic calendar shows that the Euro region will report on Retail PMI. The U.K. will issue Industrial and Manufacturing Production. The U.S. will publish data on MBA Mortgage Applications as well as the Trade Balance. Australia will announce Employment Change and the Unemployment Rate.

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