With the US. Markets closing for the Thanksgiving Holiday, investors awaited the release of a bounty of economic reports in order to assess the economy's welfare and gauge when the central bank could raise the key cash rate. Meanwhile, the currency remained fragile, a day after the Conference Board revealed that Consumer Confidence plunged to a five-month low. The U.S. Dollar weakened against several of the majors after the Department of Labor announced that the number of individuals who filed for Initial Unemployment benefits in the week that concluded on November 22nd rose by 21,000 to a seasonally modified 313,000.
Economists had predicted that the data would show a decline of 5,000. The number of persons who filed for Claims surged above 300,000 for the first time in close to three months, signaling that the labor market is slowing down. Continuing Unemployment Benefit Claims dropped to 2,316 million, a 14-year low, after coming in at 2,333 million in the previous week. Other news confirmed that Consumer Spending improved in the month of October, denoting that the American economy remains resilient. Spending, which comprises over two thirds of the economy increased 0.3 percent last month; but after adjustments to account for inflation, it only went up 0.2 percent. The Commerce Department revealed that Personal Spending surged, but missed forecasts for a 0.4 percent hike. The announcement also divulged that Personal Incomes jumped 0.2 percent in the same period, not the predicted 0.4 percent. Furthermore, the Core PCE Price Index ticked up by an adjusted 0.2 percent, and soared at an annual pace of 1.6 percent in October. Durable Goods Orders went up unexpectedly in October by a seasonally modified 0.4 percent, and did not drop 0.4 percent as many thought it would.
Orders for Core Durable Goods, which don't take into account transportation items fell by a seasonally revised 0.9 percent, disappointing investors who expected a hike of 0.5 percent. Such orders offer insight into the health of the private sector and the levels of business investments. The index which gauges such, printed a drop of 1.3 percent for October, while experts predicted a 0.8 percent surge. Exports of Core Capital Goods slipped 0.4 percent. It's worth noting that this is an economic fundamental utilized to calculate growth for the quarter. Later in the day, the University of Michigan stated that the index used for measuring Consumer Confidence dropped from the initial forecast of 89.4 to 88.8, while experts had anticipated the revision would print at 90.2 for November. The index which gauges Inflation Expectations posted at 2.8 percent this month, just a tad higher than the preliminary posting of 2.6 percent.
Manufacturing activities in Chicago rose at a slow pace in November, reducing optimism about the U.S. economic outlook. Kinsbury International confirmed that the Chicago Purchasing Manager's Index slipped to 60.8 from 66.2. And lastly, New Home Sales soared in October, although less anticipated, signaling that the real estate market is cooling. The U.S. Commerce Department said that New Home Sales went up 0.7 percent to 458,000 units, and New Home Sales for September were revised to show a dip to 455,000 units, not the previously reported 467,000. Pending Home Sales fell by a seasonally modified 1.1 percent in October, missing expectations for a 0.9 percent increase. On a year-over-year basis, Pending Home Sales went up an annual 2.2 percent, rather than the predicted 2.5 percent.
Gold Prices hovered near $1,200 during the European trading hours. Futures for delivery in February rose to $1,199.10 an ounce on the Comex Division of the New York Mercantile Exchange. But soon after the U.S. issued lackluster fundamentals on Unemployment Benefit applications and Durable Goods Orders, Gold dipped. The precious metal slumped to $1,196.90 a troy ounce in New York.
The Euro, which had advanced for two days in a row against the U.S. Dollar ended its rally subsequent to statements by the European Central Bank's Vice-President, Vitor Constancio, who signaled that the policy maker are prepared to engage in quantitative easing should the current measures fail to render results. Mr. Constancio mentioned the possibility that the bank could purchase sovereign debt in secondary markets. The Euro dipped after Mr. Constancio's speech and remained weak against the U.S. Dollar and the Yen on data our of Italy indicating a drop in Consumer Confidence.
The British Pound gained slightly versus the greenback, but declined later on as the Office for National Statistics published growth metrics showing that the U.K.'s economy expanded at the predicted rate. In other news, the Nationwide Building Society revealed that the nation's third biggest lender sustained a 36 percent fall in Mortgage Loans for the first half of 2014, highlighting the possibility that other financial institutions could be facing the same problems. Lloyds Banking Group Plc, which is the biggest mortgage provider of the U.K. saw two drops in stock prices in less than five days, and analysts say that the bank won't show profits. Economists are worried as they believe that a slowdown in home loans could translate into a decline in earnings. The housing market usually has a strong effect on the rest of the economy, and demand in the real estate sector is clearly ebbing due to stricter lending regulations.
The Yen rose against the U.S Dollar, while investors kept an eye on comments by Japan's Finance Minister, Taro Aso, who suggested that the currency's decline may hurt the economy. The OECD stated that the global economies will grow in the year ahead, but Japan won't see much progress. Officials suggested that the global economies could expand 3.3 percent in 2014, and 3.7 percent in 2015. But it stated that Japan's economy may only expand by 0.8 percent in 2015 if the Yen's drop bolsters shipments abroad.
And the Australian Dollar dipped to the downside versus the greenback, as Philip Lowe, the Deputy Governor of the Reserve Bank intimated that the dip in commodity prices could have a serious impact on the nation's currency. The Aussie surged later on even after the Bureau of Statistics said that Construction activities went down in the third quarter. New Zealand's Dollar advanced against the greenback ahead of the flurry of data everyone looked forward to receiving.
EUR/USD- QE Could Be Next
The EUR/USD slumped after two days of increases, on speculation that the European Central Bank could proceed with quantitative easing, and therefore debase the Euro. The currency pair has toppled 11 percent since May, when it hit a peak price of $1.3993. The EUR/USD remained under pressure after Vitor Constancio, the central bank's Vice-President said that the policy makers will look into buying government assets as well as sovereign bonds in secondary markets. In a speech delivered in London, Vitor Constancio suggested that the current measures may not be rendering the desired effects, and for such reason, the bank will take matters into its hands to ensure the region's economy is revitalized. He added that officials want to see the bank's balance sheet go back to the way it was in 2012. Germany has stated that if the ECB decides to buy sovereign debt, German bunds would be at the top of the list. Sources show that Germany paid under 18 percent of the ECB's capital, while France accounted for 14 percent of the capital, Italy for 12 percent, and Spain for 9 percent. However, not all of the monetary authorities are in agreement to move ahead with this plan. On the data front, Italy announced that Consumer Confidence increased less than forecast, but France said that Consumer Sentiment came in higher than predicted.
GBP/USD- Economy Grows As Predicted
The GBP/USD traded to the downside even after economic releases issued on Wednesday showed that the economy expanded by 0.7 percent in the third quarter, just as economists predicted. Other announcements divulged that Retail Sales dipped in November to the lowest level in four months, adding to evidence the economy isn't solid enough to prompt the Bank of England to boost the benchmark interest rate. Retailers stated that sales dropped by 4.0 points down to 27.0, after posting at 31.0 in October. The GBP/USD rose to the highest rate in two weeks after reports showed that the Services sector actually expanded by 0.8 rather than the previously announced 0.7 percent; and Industrial Production was revised to show a decline of 0.2 percent, not the announced 0.5 percent. The pair shrugged off metrics revealing that Business Investments dipped 0.7 percent in the third quarter due to a fall in exports. This was the first drop in more than twelve months.
AUD/USD- Construction Dips
The AUD/USD traded mixed. It rallied despite disappointing metrics pointing to a decline in Construction Activities. According to Australia's Bureau of Statistics, Construction work fell by 2.2 percent in the months of July through September, while economists predicted a decline of 1.7 percent. The sector showed a dip of 1.2 percent in the second quarter. The AUD/USD slipped after the U.S. announced that Home Prices climbed more than estimated, and the economy grew 3.9 percent, which is more than forecast. The AUD/USD rallied again after Wednesday's data indicated that the number of Americans who filed for Jobless Benefits surged above 300,000 last week, as Claims went up by 21,000. The greenback failed to strengthen even after releases showed that Personal Spending climbed 0.2 percent, and Personal Income went up the same percentage. Economists say that although the numbers went up, they rose by less than expected.
EUR/JPY- Euro Weakened By Comments
The EUR/JPY slumped due to several comments and speeches which provided insight into what the future of European monetary policy may offer. Speculators are anxiously awaiting to see what the European Central Bank decides when it meets on December 4th. The Yen remained somewhat weak but rebounded after sustaining major losses. The EUR/JPY dipped further on the possibility that the central bank may introduce quantitative easing, but the Yen remained under pressure after the Organization for Economic Cooperation and Development said that Japan's economy will only expand 0.8 percent, while the Euro monetary bloc faces deflationary pressures and stagnant growth.
Today's Outlook
Today's economic calendar shows that the U.S. markets are closed due to the Thanksgiving Holiday. Switzerland will report on GDP. The Euro region will offer data on PPI and M3 Money Supply, as well as the Business Climate, Consumer Confidence, Consumer Inflation Expectations and GfK German Consumer Climate. New Zealand will publish Building Consents and ANZ Business Confidence. Australia will announce Private Sector Credit. And Japan will deliver metrics on the National Core CPI, Tokyo Core CPI, Household Spending, Industrial Production and Retail Sales.