The U.S. Dollar rallied to the highest price in eleven months against the Euro ahead of the release of the Federal Reserve's July meeting minutes. Investors speculate that the central bank may be getting closer to increasing the benchmark interest rate, especially after Tuesday's economic releases provided evidence that the Real Estate sector is recovering. Analysts anticipate that the greenback may strengthen further before Friday, when economists and central bankers will meet in Wyoming for an annual conference. Market traders believe that Janet Yellen will deliver a speech filled with clues on the future of U.S. monetary policy when she opens the Wyoming summit. After all, this is the place where Ben S. Bernanke, the previous head of the central bank announced the possibility of quantitative easing. Experts forecast that since Mrs. Yellen tends to be dovish in her comments, it's possible that the greenback could experience a massive sell-off after Friday. The U.S. Dollar is also expected to advance before then due to money flows out of the Euro-zone. Sources say that the recent easing policies implemented by the European Central Bank are prompting investors to seek yields overseas. Market investors are anticipating that Janet Yellen will deliver a speech filled with clues on the future of U.S. monetary policy when she opens the Wyoming yearly conference. After all, this is the place where Ben S. Bernanke, the previous head of the central bank announced the possibility of quantitative easing. And since Mrs. Yellen tends to be dovish in her comments, it's possible that the greenback could experience a massive sell-off.
Gold Prices declined on Tuesday after the U.S. announced that Housing starts climbed 15.7 percent in the past month, and the number of permits issued for the construction of new homes sustained an impressive rise, reflecting the recovery of the sector. Futures for delivery in December fell to $1,294.00 a troy ounce on the Comex Division of the New York Mercantile Exchange, during the European market hours. The precious commodity has been fluctuating between $1,293.60 and $1,297.8 an ounce.
In the Euro region, recent reports showing that the economy has not expanded have left everyone nervous, believing that the newly implemented measures to bolster growth aren't producing the desired effects. The consensus is that the lackluster metrics may perhaps push the European Central Bank into further action. The Euro dipped to the lowest level in eleven months against the U.S. currency, but it remained higher versus the Yen. The British Pound erased losses against the greenback subsequent to the publication of the Bank of England's minutes, which denoted a division between policy makers regarding the timing for a cash rate hike.
The Yen depreciated against the U.S. Dollar reaching a 4 ½-month low after Japan announced the expansion of the Trade Deficit led by hike in imports.
And the New Zealand Dollar went down against the greenback for the fourth consecutive day as investors wait for the FOMC to publish its policy meeting minutes. The Australian Dollar also declined, and analysts believe it was mostly affected by comments issued by Glenn, Stevens, the Reserve Bank's governor. Mr. Stevens stated that consumers lack confidence in the economy and a hike in confidence would be more effective than a cut to the interest rate.
EUR/USD- Investors Remain Nervous
The EUR/USD plummeted dramatically as positive macroeconomic releases out of the U.S. continued to benefit the greenback. The pair began to decline after a meeting between Foreign Ministers of Russia and the Ukraine took place in Berlin. This boosted risk appetite, but failed to support the Euro. The EUR/USD hit the lowest rate in almost one year on signs the world's biggest economy is improving, as reflected by Tuesday's housing reports. In the meantime, market traders anticipate that the European Central Bank may have to come up with more remedies to solve the lack of growth the Euro region is experiencing.
GBP/USD- Authorities Divided
The GBP/USD advanced once the Bank of England published the minutes from the most recent policy meeting, which pointed to the fact that there's a division between the monetary authorities. Seven of them are opposed to deviating from the status quo; while two of them believe it's time to boost the interest rate. Ian McCafferty and Martin Weale are the two policy makers who think that the rate should be increased by 25 basis points this month. The two officials indicated that the recent string of reports have pointed to the U.K.'s economic recovery. But the majority says that the economy would be sensitive to shocks if they raised the key cash rate. A rate increase would pose serious challenges for those in debt and would dampen the economy's progress. The majority of officials also stated that the recent CPI data was weak. Expert traders predict that the GBP/USD could extend gains if the BOE considers raising the rates. On the data front, the Confederation of British Industry confirmed that the index which keeps track of Industrial Orders' Expectations rose from 2 to 11 this month.
EUR/JPY- Japan Issues Trade Figures
The EUR/JPY continued to trade higher, although it gave up some of its gains. Japan reported that its Trade Deficit expanded in July, even though exports went up for the first time in three months. The report also revealed that imports were still up, though lower than previously announced due to the fact that activities in the business sectors have slowed down after the sales tax as increase in April. This is the 25th month that Japan posts a shortfall. Economists attribute this to the hike in oil imports, something that's become necessary due to the fact that the nuclear reactors remain idle since the meltdown experienced at the Fukushima Power plant in 2011. According to the announcement, exports climbed 3.9 percent, surpassing the 2.3 percent surge in imports. The Adjusted Trade Balance contracted from 1.07 to 1.02 trillion Yen. Economists expected the shortfall to come in at 0.77 trillion Yen. And Trade Balance went from 822 to 964 billion Yen. The Euro slipped slightly on fears the E.U.'s economy has stopped growing, as denoted by the data issued in the past few days.
AUD/USD- Stevens Speaks
The AUD/USD depreciated subsequent to a speech by Glenn Stevens, the Reserve Bank of Australia's governor. Mr. Stevens spoke to the Economics Committee of the House of Representatives. In his testimony about the economy he indicated that the AUD/USD remains high due to the fact that investors find the country a great place to invest. He added that while policy makers have complained about the overvalued currency, it's likely that it will extend its decline. Mr. Stevens voiced his concerns about the state of the labor sector, especially since the level of unemployment has reached the highest rate in twelve years. He concluded by saying that historians consider the jobless rate as low, but nevertheless a cause for concern.
Today's Outlook
Today's economic calendar shows that Switzerland will issue the Trade Balance. The Euro region will publish Manufacturing and Services PMI. The U.K. will release Retail Sales, Core Retail Sales, and Public Sector Net Borrowing. The U.S. will announce Initial and Continuing Jobless Claims as well as Manufacturing PMI, Existing Home Sales and the Philadelphia Fed Manufacturing Index.