The U.S. Dollar rose against the majority of its Forex counterparts and traded at the highest rate in twelve months versus the British Pound after the Bank of England indicated that the U.K. economy would not expand as much as previously predicted in August. The greenback rallied against the Euro following comments by Jens Weidmann, a board member from the European Central Bank, who suggested that E.U. inflation would likely remain low for some time to come. But it declined on Thursday as William C. Dudley, the New York Federal Reserve's President, stated that investors ought to be more patient about the timing for the central to raise the key cash rate. The U.S. currency extended losses once the Labor Department confirmed that the number of individuals who filed for unemployment benefits for the first time in the week that concluded on November 8th rose by 12,000 to a seasonal 290,000. The metrics missed forecasts as economists predicted these would only increase by 4,000.
Gold Prices remained steady as the markets waited for the U.S. to publish employment data to obtain more solid information on the health of the American economy and gauge what the Fed may do regarding monetary policy. Futures for December delivery traded at $1,159.00 a troy ounce during the European market hours. Reports show that the precious commodity has come under enormous selling pressure in the last few weeks on speculation that the U.S. policy makers are inching closer to boosting the interest rate for the first time since 2006. In other reports, sources divulged that demand for gold in China contracted for a third quarter as the drop in prices failed to encourage buyers to invest in gold bars or jewelry. Purchases in Asia's largest economy plummeted 37 percent in the months of July to September. India was the only nation that bought more of the shiny metal. Bullion for immediate delivery erased 3.4 percent of gains in 2014 and traded at $1,161.14 an ounce during the morning hours in Shanghai. Gold Contracts shifted trends after the U.S. published dire Unemployment Benefits data, showing that the number of people who filed for such benefits surged more than predicted. Futures for December delivery went up to $1,167.30 a troy ounce on the Comex, before settling at $1,162.70 during the morning hours in New York.
The Euro traded somewhat higher versus the greenback subsequent to news revealing that the yearly rate of German Inflation stayed at the same percentage as it posted in September, although prices declined since the previous month. In Spain, Consumer Prices also went down in October. The disappointing numbers have bolstered further concerns since they point to persisting low levels of inflation.
The Swiss Franc came very close to reaching the highest price in over two years against the shared currency while the central bank's Vice-President, Jean-Pierre Danthine, reiterated that the SNB would adhere to the 1.20 per Euro limit.
The British Pound weakened on Wednesday upon the publication of the central bank's quarterly report. It showed that the policy makers believe the British economy will only expand 2.9 percent in the year ahead, and only 2.6 percent in 2016. The monetary authorities had previously estimated that the economy would rise 3.1 percent in 2015. The Sterling traded at a fourteen-month low versus the greenback as a slowdown in the real estate sector increased worries about the state of the U.K.'s economy. The British Pound also slumped versus the Euro and touched the lowest rate in three weeks after Monetary Policy Committee member, Ben Broadbent, intimated that the British economy may continue towards disinflation.
The Yen plummeted towards a fresh seven-year low versus its U.S. peer as speculation over a possible snap election in the last month of the year continued to have an effect on the Yen. Furthermore, the likelihood that Prime Minister, Shinzo Abe could hold off from raising the sales tax again weighed on the Yen.
And the New Zealand Dollar hovered near a two-week high while the Australian currency traded almost unchanged despite positive releases showing that Inflation Expectations went up in October. In the smaller of the two nations, announcements indicated that the Business NZ Manufacturing Index surged from 58.5 to 59.3 last month.
EUR/USD- German Inflation Stagnates
The EUR/USD climbed on Thursday after reports out of the Euro-zone revealed that France's yearly Inflation rate climbed 0.5 percent in October after printing a hike of 0.3 percent in the previous month. In Germany, sources indicated that inflation continued to read at 0.8 percent, though consumer prices slipped 0.3 percent. Spain stated that the Consumer Price Index dipped 0.1 percent in the same period from the year before; and on a month-over-month basis, prices went up 0.5 percent after posting at 0.2 percent in September. Inflation remains a main problem in the E.U. Germany's Consumer Price Index read at the worst since the start of the year, and even though investors prepared for dire fundamentals, the EUR/USD went up. The news denote that France continues to face challenges, and Spain's prices have fallen yet again. And while this has been a relatively quiet week for the currency pair, market traders predicted there would be some movement when the U.S. issued the jobs metrics. Today, all eyes will be on the E.U. as it will issue data on Gross Domestic Product and the Consumer Price Index.
GBP/USD- House Prices Boost Speculation
The GBP/USD plummeted to the least in more than one year as the Royal Institution of Chartered Surveyors announced that House Prices in the city of London dropped in October to the lowest level in four years. Even though the British economy remains the fastest growing among the G-7 countries, the recent string of soft reports indicated that the British economy has lost momentum. Industrial output grew at a very slow pace in September, and Retail Sales plunged more than anticipated. The central bank, which left the key cash rate at 0.5 percent reduced the growth predictions for this and the coming years, and suggested that Inflation could dip in the next few months. Mark Carney, the Bank of England's governor stated that policy makers won't consider raising the benchmark interest rate until November of 2016.
EUR/JPY- Abe Issues Decision
The EUR/JPY rose as the Yen continued to weaken. Prime Minister, Shinzo Abe has announced that he will call for elections in December, and will postpone raising the sales tax. With the Federal Reserve and the Bank of Japan diverging on their monetary policies, investors are opting for buying more Dollars, prompting the Yen's decline, and therefore the EUR/JPY's further drop. All this talk about elections has improved market sentiment. Investors speculate that if Premier Abe comes out victorious, he will use his win as a reason to institute another bout of inflationary measures and perhaps delay the sales tax increase. Meanwhile, some of the central bank's policy makers are calling for more aggressive easing as added stimulus may contribute to a rise in inflation. The BOJ has indicated that it will study how it can slow down the buying of financial assets, and how it can go back into using conventional stimulus measures.
AUD/USD- China Reports On Sales
The AUD/USD hovered close to the same levels as it traded on Wednesday even after China announced a drop in Retail Sales by an annual 11.5 percent. In addition, the Chinese government indicated that expansion of the real estate sector has slowed down especially in the first ten months of 2014. Beijing has taken steps to improve the market, and the effects of the new measures may be starting to show. But the loss of momentum in real estate investments continues to dampen growth in China's economy. On the positive side, the Melbourne Institute indicated that Australia's Inflation Expectations jumped to 4.1 percent after printing at 3.4 percent in September. The currency pair declined subsequent to a speech delivered by the Reserve Bank's Assistant Governor, Christopher Kent. He suggested that an intervention in the Forex market may be possible.
Today's Outlook
Today's economic calendar shows that the E.U. will report on CPI and GDP. The U.S. will publish data on Core Retail Sales and Retail Sales, as well as on the Export and Import Price Indexes, Michigan Consumer Expectations, Consumer Sentiment, and Business Inventories.