The U.S. Dollar traded higher on Wednesday against the majority of its Forex peers as market traders waited for the Federal Reserve to issue the Minutes from the last policy meeting. The greenback remained at a seven-year high versus the Yen as Japan continued to dominate the headlines following disappointing macroeconomic releases which confirmed the nation has once again entered into a recession. On the data front, the U.S. Commerce Department divulged that Building Permits climbed more than predicted in October, but Housing Starts posted below expectations. Permits rose 4.8 percent, from 1,018 million to a revised seasonal 1,080 million units. However, Housing Starts dipped by 2.8 percent in the last month. Economists believe that the rise in Building Permits to the highest level in 6 ½ years serves as evidence that the real estate sector has regained its footing.
After reaching over $1,200.00 a troy ounce, Gold Prices dipped below a two-week high as the greenback gathered momentum ahead of the release of the FOMC's Minutes. The precious commodity touched a four-month low in the early part of November, and this decline spurred physical demand. The International Monetary Fund stated that Russia increased its gold reserves by purchasing 150 metric tons so far in 2014. Contracts for delivery in December reached $1,196.40 an ounce in the morning hours on the Comex Division of the New York Exchange, after trading at $1,204.10 on Tuesday. Bullion for immediate delivery dipped 0.2 percent and traded at $1,194.34 in London. Sources say that the European Central Bank may include gold in its asset purchases in order to fight low levels of inflation.
The Euro is trading close to where it was on Tuesday and showed slight fluctuations subsequent to the publication of the Current Account data which came out unexpectedly positive, showing a surplus. However, a vast number of investors stayed on the sidelines as they waited for key economic news out of the U.S. along with the Federal Reserve's Minutes. Despite the fact that the E.U.'s economy has slowed down, announcements published on Tuesday revealed that German Investor Confidence soared. The Euro region's data was also strong as it denoted a hike in economic sentiment. The stellar fundamentals followed news from Germany which revealed that the country has managed to avert falling into a recession with a slight gain in the Gross Domestic Product of 0.1 percent. The European Central Bank's President, Mario Draghi and his monetary authorities are under pressure to take some type of action to revive the sluggish economy. Analysts say that the deep interest rate reductions have not yielded results so the bank has engaged in purchasing covered bonds. Mr. Draghi intimated that they'll purchase a diversity of assets and these may include sovereign debt.
The British Pound rallied as the Bank of England issued the Minutes from the last policy meeting. These confirmed that seven of the nine members are still against raising the borrowing costs, and are now worried that deflation could become a major problem. Even though they're concerned about the effects the Euro-zone's economic problems could have on the U.K., the policy makers believe that wages may rise, especially since business investments remains strong. The BOE predicts that productivity could remain sluggish and this may add to the risks the country faces.
Japanese Prime Minister Shinzo Abe announced that the sales tax increase won't take place until perhaps October of next year, and he will break up the Lower House of Parliament to move forward with December elections. Mr. Abe, who seeks support for his economic program asked the cabinet to come up with answers that could help bolster growth. The Yen slipped further to the downside against the U.S. Dollar even though sentiment in the Forex caused speculators to seek harbor assets.
And RBA governor Glenn Stevens reiterated that there are no plans for boosting the interest rate at this time, and given the decline in mining revenues, together with the surge in unemployment, the central bank will adhere to the current policies. New Zealand's Dollar was impacted by reports showing that powdered milk prices plunged dramatically.
EUR/USD- Current Account In The Green
The EUR/USD fluctuated slightly on Wednesday as all the markets waited for the Federal Reserve to publish the Minutes from the last policy meeting. The currency pair gained on Tuesday following stellar reports out of Germany indicating a major increase in investor confidence. Meanwhile, data out of the E.U. showed that the Current Account Surplus expanded; but the positive metrics failed to bolster the EUR/USD. Key members of the Governing Board of the European Central Bank are still fighting over their differences of opinion regarding stimulus. Jens Weidmann who heads the Bundesbank has stated that additional stimulus is not a guarantee they'll obtain the desired results. He added that the 1 trillion Euro hike in the balance sheet is something that ought to be expected, and not set as a goal. He worries about the fact that several member nations could relax their views towards fiscal austerity as this could be detrimental for the region.
GBP/USD- BOE Releases Minutes
The GBP/USD rose on Wednesday as the Bank of England revealed that the policy makers remain divided on several issues, mainly on when to raise the borrowing costs. The Committee voted 7-2 to leave the rates on hold and maintain the current quantitative easing program. The two members who dissented, Martin Weale and Ian McCafferty would like to see the rate go up 0.25 percent. But at this time, the main concern is the decline in inflation. The monetary authorities fear that the present levels could dip lower as in the Euro region. The GBP/USD rallied for the first time in close to one week as the Minutes also indicated that if deflationary pressures persist, there may be a need for changes. Among the positive comments, officials recognized that investments in the business sector have not lost momentum, and it appears that wages could rising.
AUD/USD- News From Tokyo Dominate
The AUD/USD fell as Japan's announcements regarding the postponement of the second sales tax hike dominated the news and impacted risk appetite in the Forex. Meanwhile, in the South Pacific nation, Glenn Stevens, the Reserve Bank's governor echoed previous comments by saying that the policy makers won't contemplate changes in policy as the economy needs to achieve stability now that mining is no longer a major source of revenue.
USD/JPY- No Surprises From BOJ
The USD/JPY remained at a seven-week high after the Bank of Japan announced that with a vote of 8 to 1 agreed to leave monetary policy unchanged. But Takahide Kiuchi, who dissented, stated that the pace sustained prior to the October 31st changes was "appropriate." The board's members did not change their opinion regarding the growth outlook and reiterated that Consumer Price Inflation could stay below 1 percent for now. The Bank of Japan's overnight meeting failed to provide new surprises. Haruhiko Kuroda, the bank's governor praised the success of quantitative easing as it has helped improve employment and boost wages. The bank will move forward with money market operations in order to boost the monetary base at a yearly pace of approximately 80 trillion Yen. Furthermore, the bank will continue to buy the country's government bonds. On the data front, reports showed that the All Industries Activity Index went up, but less than expected. The Japanese Ministry of Economy, Trade and Industry revealed that the index climbed a seasonally revised 1.0 percent in October, after coming in at -0.1 percent in the prior month. In addition, the index of Leading Economic Indicators surged in the same period.
Today's Outlook
Today's economic calendar shows that Switzerland will publish the Trade Balance. Japan will post the BOJ's Monthly Report. The E.U. will announce Manufacturing and Services PMI, as well as Consumer Confidence. The U.K. will issue Retail Sales, Core Retail Sales and CBI Industrial Trends Orders. The U.S. will provide Initial and Continuing Jobless Claims, CPI, Core CPI, Existing Home Sales, the Philadelphia Fed Manufacturing, and Manufacturing PMI.