The U.S. Dollar rallied against the majors as the gauge which measures Homebuilder Confidence in the U.S. rose to the highest level in seven months. The data also raised speculation that the central bank could decide to boost the benchmark interest rate soon. The greenback was also supported by optimism in the markets, brought on by the fact that Moscow and Kiev continued to negotiate, a factor that could end the crisis in the region. On Tuesday, the Commerce Department stated that the number of Building Permits in the U.S. surged by 8.1 percent in July to 1,052 units after posting a total of 973,000 units in the prior month. The announcements also revealed that Housing Starts climbed by 15.7 percent in July, and Consumer Confidence jumped 0.1 percent after going up 0.3 percent in June. U.S. Consumer Prices climbed 0.1 percent last month, just as analysts expected, and Core Consumer Prices ticked up 0.1 percent rather than the predicted 0.2 percent. The numbers denote that consumer prices went up, though at the slowest in close to five months. Economists say there's some price pressure although the economy is improving.
Gold remained close to $1,300.00 a troy ounce as speculators kept an eye on the hot spots around the globe. Futures for December delivery traded at $1,300.30 on the Comex during the European market hours. The day before, the shiny metal dropped 0.53 percent and reached $1,299.30 a troy ounce. But the commodity was boosted by positive metrics on U.S. Homebuilder Sentiment.
And while there were no key economic announcements out of the Euro region apart from Monday's Trade Balance, the Euro remained under pressure days after the E.U. published disappointing growth figures, thereby putting pressure on the monetary authorities to take action. The Euro dipped to the downside on Monday after Germany's central bank stated that it expects the economy to expand at a slower pace than previously predicted throughout the rest of 2014. The release indicated that policy makers worry about the effects the economic sanctions against Russia could have on the Euro-zone's economy. The British Pound fell again against the greenback subsequent to the announcement of a slowdown in the British level of Inflation. Even though the Sterling depreciated, analysts expect it to rally as traders are speculating that the currency will recoup its footing. Investors also predict that the Bank of England will raise the interest rate this year rather than wait until 2015.
The Yen dipped against the U.S. Dollar while market investors await the big 3-day event scheduled to begin this Friday, at which time economists and central bankers will gather in Jackson Hole, Wyoming. Janet Yellen, the head of the Federal Reserve, will offer her opinion about the labor markets and will provide clues on how the U.S. employment sector will play a role in the development of U.S. monetary policy.
The Reserve Bank of Australia published the minutes from its last monetary policy meeting, which showed that policy makers are not certain as to how much the economy may expand, and are adamant about leaving the interest rate at the current level for some time. In New Zealand, the price of dairy Futures have continued to drop. All eyes are on the upcoming auction, although economists predict that dairy commodities could continue to fall. The Kiwi depreciated versus its U.S. counterpart after reports showed a decline in Producer Price Inflation.
EUR/USD- Euro Weighed Down By Last Week's News
The EUR/USD extended losses on Tuesday, days after the region published dire economic growth metrics, and as Germany's Bundesbank reiterated that the economy may grow even slower throughout the remainder of the year. The EUR/USD's drop was limited as the markets remain positive that Russia and the Ukraine will be able to work out their differences and therefore put an end to the conflict. The Euro region's Trade Balance came in with a surplus of 13.8 billion Euros for June, denoting a decline from the previously announced 15.2 billion Euro surplus of June. At this time, the markets are expecting to hear from the central bankers who will be attending the yearly conference in Wyoming. Mrs. Yellen, who will open the 3-day gathering with a speech is expected to talk about the sub-optimal conditions that prevail in the global labor markets. Analysts say that she will probably ask for patience. Mr. Mario Draghi, the President of the European Central Bank will also be addressing his fellow central bankers.
GBP/USD- U.K. Inflation Drops
The GBP/USD plunged to the lowest rate in 4 ½ months as lackluster Inflation data out of the U.K. caused investors to anticipate that the Bank of England may not raise the benchmark interest rate until 2015; however, there are some who still believe this may happen before the end of this year. According to the Office for National Statistics, the U.K.'s Consumer Price Inflation dipped from 1.9 to 1.6 percent last month, missing expectations for it to rally 1.8 percent. Furthermore, month-on month, Consumer Prices dipped 0.3 percent, more than the predicted 0.2 percent. Core CPI which doesn't include food or energy items rose 1.8 percent, disappointing economists who anticipated a hike of 1.9 percent for July. Lastly, reports confirmed that House Price Index went up 10.2 percent in June, less than the predicted 11.5 percent. The GBP/USD had advanced after the weekend, when Mark Carney, the governor of the Bank of England intimated that policy makers may boost the interest rate without waiting for salaries to go up.
EUR/JPY- Pair Remains Flat
The EUR/JPY traded sideways due to a lack of macroeconomic fundamentals. The pair dropped on Monday as market investors kept an eye on talks between Russian and Ukrainian leaders. At present, speculators anticipate that the Bank of Japan may opt for expanding stimulus, given the line-up of soft releases published recently. In Japan, domestic surveys revealed that 100 out of 106 businesses anticipate that the Japanese economy may show growth before the end of 2014; furthermore, these companies are not opposed to the idea of raising the sales tax once again. Economists anticipate that Mrs. Yellen, the head of the Federal Reserve won't say anything the markets don't already know. They predict that Mrs. Yellen will point to the slack that still exists in the world's employment sectors when she addresses central bankers at the annual summit in Jackson Hole, Wyoming.
NZD/USD- Dairy Prices Expected To Drop Further
The NZD/USD spiraled to the downside after Statistics New Zealand announced the decline of Producer Price Inflation Input by 1 percent. Input represents the value of goods and services that local producers consume or use. Producer Price Output prices also dropped in the last quarter due to a fall in dairy prices. The reports indicated that milk products have fallen in the last year because farmers have had to boost production in order to recoup losses by taking advantage of higher prices. This prompted an excess in inventory and the decline in prices. The release also revealed that with the drop in demand from emerging economies, dairy prices remained under pressure. Today, Fonterra Cooperative Group will hold an auction which will be closely monitored by speculators. Lastly, the country's Central Bank announced that it cut the annual inflation forecasts from an estimated 2.4 to 2.2 percent. According to analysts, the NZD/USD could rebound dramatically now that China has increased demand for dairy products and for other major New Zealand commodities.
Today's Outlook
Today's economic calendar shows that Japan will provide data on the All Industries Activity Index and Manufacturing PMI. The U.K. will publish the MPC meeting minutes and CBI Industrial Trend Orders. The U.S. will release the FOMC meeting minutes. China will report on HSBC Manufacturing PMI. And New Zealand will offer information on Credit Card Spending.