The U.S. Dollar rallied to the highest rate in months against several Forex majors after the Federal Reserve published the Minutes from its most recent policy meeting. The greenback first dipped slightly against the Euro, but the Fed Policy Meeting Minutes offered more information than investors had anticipated, thereby supporting the Dollar's climb. According to the report, policy makers are contemplating an earlier than planned interest rate hike. This is due to the fact that the employment sector has shown improvement. Of course, not all of the monetary authorities are in agreement. Many of them believe that the labor sector is not where it should be, but they believe it's "noticeably closer" to what they deem as normal. At this point, analysts anticipate that the September statements issued by the monetary authorities will be less bearish, and they won't be surprised if Fed Chairwoman Janet Yellen offers hawkish comments at the opening of the annual Wyoming conference. Mrs. Yellen is scheduled to address central bankers and economy experts in Jackson Hole, and the markets anticipate the greenback could extend gains prior to such. Nobody predicted that the FOMC Minutes would offer so many clues as to the future of U.S. monetary policy, and this is benefitting the Dollar's uptrend. On the data front, the Department of Labor said that the number of individuals who filed for Initial Unemployment Benefits in the week which concluded on August 16 dropped by 14,000 to 298,000. The numbers beat forecasts for a decline of 12,000 claims.
Gold Futures erased gains subsequent to the publication of the Federal Reserve's Minutes, especially as they pointed to the possibility of a rate hike for earlier than planned. Gold for delivery in December fell 1.07 percent and traded at $1,281.40 a troy ounce during the American market hours (EST), in the New York Mercantile Exchange. The shiny metal fell as the FOMC Minutes revealed that policy makers believe the labor sector is showing progress, a factor that supports the tightening of policy. Futures remained to the downside reaching the lowest rate in 2 months as investors await the yearly summit of central bankers, which begins today in Jackson Hole, Wyoming.
Lackluster reports out of the Euro region denoting a drop in Factory activities contributed to the fall of the already weakened Euro. The currency plunged to an 11-month low against the U.S. Dollar and remained under pressure upon the release of soft economic data. The Euro is trading below its rate reached in September of last year, and may continue to slide further given the less than bearish Fed Minutes. Furthermore, the slowdown in Manufacturing is likely to place added pressure on the European Central Bank to increase easing. With Industrial Output and Factory Orders also posting lackluster numbers, it's possible the ECB could take action soon. The British Pound fell to the lowest price since April versus the U.S. Dollar despite positive Retail Sales data out of the U.K. The Swiss Franc ticked up against the greenback retreating from the lowest rate in seven months after official news indicated that Switzerland posted a Trade Surplus of 3.98 billion Francs for July, denoting that it expanded from 1.41 billion Francs. The Swissie fluctuated steadily against the Euro.
The Yen slipped against the U.S. Dollar after the Federal Reserve issued the monetary policy Meeting Minutes, which offered clues as to the timing of a reduction in the interest rate.
In the South Pacific, selling pressure prompted New Zealand's Dollar to plummet to the lowest price in five months against its U.S. counterpart. Analysts say it's not rare to see the Kiwi decline after a dairy auction, especially since the markets take time to digest the events. The Kiwi managed to erase some of the losses, while remaining lower than the greenback. However, it remained under pressure after China announced that its Manufacturing index dropped more than anticipated. This also caused Australia's Dollar to depreciate against the U.S. Dollar. In fact, the Aussie sustained a major fall versus the majority of its peers once HSBC Holdings Plc and Markit Economics revealed that Chinese Manufacturing slowed down.
EUR/USD- Data Weighs On Policy Makers
The EUR/USD fell dramatically on Thursday and hovered near an 11-month low, a day after the Federal Reserve Minutes were published. The pair failed to recover especially as the data issued out of the Euro monetary bloc revealed that Manufacturing activities plunged to the lowest level in 13 months, with the index posting at 50.8. The Manufacturing Purchasing Manager's Index had come in at 51.8 in July, and analysts only expected it to dip to 51.3. The E.U.'s Services PMI was also disappointing as it printed a drop from 54.2 to 53.5 for August. Germany, the region's largest economy showed that its factories didn't fare as well as expected either. Manufacturing fell from 52.4 to 52.0 and Services slipped from 56.7 to 56.4. France showed that Manufacturing cooled off for a sixth month in a row, and the official metrics came in at the lowest reading in 15 months. Economists believe that the Euro region may be on track for showing that its economy only expanded between 0.3 and 0.4 percent in the months of July through September. The less than stellar numbers are likely to add pressure to the European Central Bank to take some type of action soon. The EUR/USD rebounded, but its gains were limited after the U.S. Department of Labor said that the number of persons who filed for Unemployment Benefits in the week that concluded on August 16 fell by 14,000, beating forecasts for a drop of 12,000.
GBP/USD-Retail Sales Jump
Despite news out of the U.K. showing a hike in Retail Sales, the GBP/USD dropped to a 4 ½ month low. The official releases confirmed that retailers sold 0.1 percent more in July than in June. And while the numbers were positive, they failed to meet forecasts for a 0.4 percent hike. In addition, June's Retail Sales data was modified to show a rise of 0.2 percent, not the previously announced 0.1 percent. On a year over year basis, Retail Sales surged 2.6 percent. Meanwhile, market traders believe that Mark Carney, the Bank of England's governor may influence the opinion of policy makers. Mr. Carney has said that the economic recovery may be dampened by a rate hike. Minutes issued on Wednesday revealed that two of the policy makers favor raising the interest rate, while the other seven are against it.
EUR/JPY- PMI Surprises Investors
The EUR/JPY advanced slightly, although the Yen gained a few pips following the announcement of economic fundamentals indicating growth in the Manufacturing sector. According to sources, the Manufacturing Purchasing Manager's Index came in stronger than predicted, supporting the belief that the economy is progressing. Activities in the Manufacturing area improved due to a hike in exports and demand from Japanese consumers. Japan's Flash Manufacturing PMI posted a seasonally adjusted 52.4 this month, after printing at 50.5 in July. The index is above 50, indicating that it's in expansion territory. Analysts say that the numbers denote the quickest expansion in almost five months. They added that a hike in exports points to the fact that the global economies are also on the path to recovery. Meanwhile, investors remain worried about the economy of the Euro-zone. Wednesday's data showed that Germany's inflation did not meet forecasts; and with Thursday's announcements confirming a drop in the Manufacturing and Services sectors, it's more than likely that the central bank will have to sprint into action. Economists believe that some of the weak data resulted from the fact that Russia is the E.U.'s second biggest market for food products. For such reason, the ban that Russia placed on food imports is dampening growth.
AUD/USD- Leading Index Climbs
The AUD/USD dipped on Thursday following reports out of China revealing that the preliminary posting of HSBC Manufacturing came in at a three-month low of 50.3 this month, after a reading of 51.7 in July. On the domestic front, Australia announced that according to the Conference Board, the Leading Index climbed 0.4 percent in June, subsequent to the 0.2 percent rally in May. The news out of the Chinese nation kept the AUD/USD within a tight channel, although the pair remained under pressure after comments by the Reserve Bank's governor, Glenn Stevens. The governor offered testimony before the House of Representatives and suggested that Australia has become an ideal place for investors from around the globe. He added that the Aussie is likely to depreciate, and he is still concerned about the state of the employment sector. He concluded by telling Parliament that low interest rates aren't enough to help the economy, but intimated they'll stay low for some time to come.
Today's Outlook
Today's economic calendar shows that the Fed Chairwoman Yellen and the European Central Bank's President, Mario Draghi, are scheduled to deliver speeches at the annual conference in Jackson Hole, Wyoming.