Daily Report: EUR/USD, GBP/USD, EUR/JPY And XAU/USD : September 18, 2013

Anticipation over an upcoming Federal Reserve announcement at the conclusion of its two-day meeting kept the U.S. Dollar from strengthening on Tuesday. The greenback was only able to advance versus the Yen for a brief period as investors traded cautiously throughout the day on speculation that the central bank may announce a plan to begin reducing stimulus. Meanwhile, domestic reports showed that Consumer Prices went up, although not as much as predicted. The metrics revealed that Consumer Inflation jumped by a mere 1.5 percent, and Core Inflation inched up by 0.1 percent in the month of August. The greenback traded even weaker than the Swiss Franc and commodity-related currencies like the Australian, New Zealand and Canadian Dollars. Gold prices were impacted by the announcement of CPI metrics. Futures for December delivery traded low during the morning hours of the U.S., showing a drop of 0.2 percent. Economists say that figures denoting Core Consumer Prices climbed at an annualized rate of 1.8 percent will help the Federal Reserve make a clear assessment of existing inflation pressures that could impact the economy.

The Euro traded higher against its U.S. peer subsequent to the release of positive economic reports which showed that the German economy had strengthened. The 17-nation currency benefitted from the release of stellar data and rallied against the British Pound and the Yen. The Euro remained strong as market investors await the conclusion of the Federal Reserve’s policy meeting. The British Pound retreated slightly off previous highs against the greenback as a release confirmed that the Consumer Prices in the U.K. fell in August.

The Yen has traded mixed against the U.S. currency as the Fed decision loomed over the markets, and as Prime Minister Shinzo Abe awaits a feasible government plan that would help balance out an increase in sales tax.

Lastly, in the South Pacific, Australia’s Dollar stopped gaining against the Kiwi after the country’s central bank published the minutes from its September policy meeting, revealing that policy makers are leaving their options open and may in fact cut the costs of borrowing money. The minutes also reflected comments suggesting a devaluation of the monetary unit would help the economy grow. The Aussie traded steady against the greenback but rallied later on as investors shifted their focus to the Federal Reserve’s two-day meeting. New Zealand’s Dollar traded steadily against the U.S. monetary unit ahead of an announcement on the Fed’s decision.

EUR/USD- Sentiment Improved
The Euro traded higher against the greenback and sustained a second day of gains after reports showed that the ZEW Index which measures economic sentiment in Germany went up from 42.0 to 49.6 this month, as the outlook for the Euro region’s economy improved. The ZEW Index which measures economic confidence in the Euro monetary bloc surged from 44.0 in August to 58.6 this month as well.

GBP/USD- CPI Pushes Sterling Down
The British Pound gained a few pips after retreating from earlier highs against the U.S. currency after the U.K. issued CPI and PPI reports that posted below forecasts. This, according to analysts, has left the bank of England with a number of options to ponder. The metrics did not bolster any major increases or declines in the currency, despite the fact that investors shied away from the Dollar in anticipation of the Federal Reserve Chairman’s speech. The Office for National Statistics confirmed that Consumer Price Index dipped from 2.8 to 2.7 percent in August. Core CPI stagnated at a 2 percent, and Consumer Prices jumped by 0.4 percent.

EUR/JPY- Euro Climbs Again
The Euro surged again against the Yen especially as it rallied versus the greenback before the Federal Reserve issues its policy statement. Geopolitical tensions in the Middle East eased as the U.S. and Russia reached a consensus on how to treat the issue of Syria’s chemical weapons. Meanwhile, Japanese Prime Minister Shinzo Abe addressed the G-20 members and indicated that the country will work hard to achieve its fiscal goals. With the Olympic Games scheduled for 2020, Mr. Abe feels that the economy will grow even faster. The Euro was bolstered by positive data out of Germany showing an increase in investor sentiment; in fact the numbers revealed that confidence surged more than expected.

XAU/USD- Gold Drops A Fifth Time
Gold remained under pressure and declined in value for the fifth time within six trading sessions after official data showed that the U.S. cost of living climbed, though less than anticipated. This dampened the demand for the shiny metal as a hedge versus inflation. Futures for December delivery dipped to $1,308.70 on Tuesday morning in the New York Mercantile Exchange. Economists forecast that gold will continue to head towards the downside all the way into next year, as data out of the U.S. will show acceleration in growth, thereby requiring less stimuli.

Today’s Outlook
Today’s economic calendar shows that the U.K. will publish the MPC Meeting Minutes. The U.S. will report on Building Permits, Housing Starts, and of course the FOMC will release the much anticipated Statement. The central bank will also issue the Interest Rate Decision at which time the Federal Reserve Chairman, Ben Bernanke, will speak. New Zealand will publish data on GDP. And Japan will announce Adjusted Trade Balance as well as Trade Balance.