The U.S. Dollar rebounded on Monday as risk aversion ebbed in the Forex market following a report out of Geneva which confirmed that Iran agreed to reduce its nuclear activities, while other nations consented to lifting the sanctions imposed on precious metals like gold and on oil. As part of the agreement, the Iran will be able to purchase car and airplane parts once again, and will also be allowed to offer its petrochemical products to the markets. The greenback rallied versus the safe haven currencies on the likelihood the Federal Reserve may begin cutting back on stimulus before the year’s end. Meanwhile, Gold prices dropped to a four-and-a- half-month low when Geneva announced the Iran Accord, prompting optimism in the markets, despite the fact that the agreement is reversible. Futures for December delivery traded at $1,232.15 on the Comex Division of the New York Mercantile Exchange. Speculators will now focus on the release of U.S. housing data as they continue to trail the greenback in an effort to obtain clues on what the Federal Reserve will decide during its next policy meeting.
The Euro traded at session lows against the greenback after Ardo Hansson, a member of the European Central Bank’s Governing Council, suggested that the bank is contemplating the effects of reducing the benchmark interest rates once again, and perhaps opting for negative deposit rates. Mr. Hansson stated that the deflationary pressures are a matter of concern and may convince policy makers to cut interest rates. The British Pound also slumped against the U.S. Dollar, not just as investors speculate over the future of U.S. monetary policy, but also as a result of less than stellar economic news which denoted a drop for Mortgages Approvals, which nevertheless remained at close to a four-year high.
The Yen hovered close to six-month lows versus the greenback and hit near four-year lows against the 17-nation currency on speculation that upcoming macroeconomic fundamentals may show acceleration for the inflation rate. The central bank’s governor, Haruhiko Kuroda, suggested that this provided evidence that the current easing measures are working. Mr. Kuroda indicated that although the measures are aggressive, they will help Japan reach a 2 percent inflation target.
Lastly, the Australian Dollar traded at six-week lows as market investors believe the Reserve Bank may still reduce the cost of borrowing money. Last Thursday Bank Governor Glenn Stevens said that the currency remains overvalued, and an intervention in the markets may be possible. The New Zealand Dollar edged higher versus its U.S. peer as demand for risk assets increased following news of the Iran accord, and as investors anticipate the Federal Reserve may being cutting monthly bond purchases by as soon as December.
EUR/USD- Italian Senate Scheduled To Vote
The Euro weakened against the U.S. Dollar even as risk appetite improved following reports of an Iranian accord after talks in Geneva. The Euro slumped in anticipation of this week’s elections, when the Italian Senate will decide whether to banish the former Prime Minister, Silvio Berlusconi. If he is expelled, Mr. Berlusconi will not be immune from arrest, and may face prison time for tax evasion, abuse of power and other charges. In the U.S., the holiday season begins this week with the Thanksgiving Holiday, and speculators are hoping that Retail Sales will post positive numbers in order to bolster the possibility Fed cutbacks to stimulus. In the E.U. there’s still a possibility for another key cash rate cut, especially as a decline in inflation has raised concerns over deflationary pressures.
GBP/USD- Mortgage Loans Drop
The British Pound slumped versus the greenback as the British Banker’s Association indicated that loan approvals for the purchase of homes fell from a modified 43,182 in September to 42,808 last month. The September numbers were the highest in four years. According to some Forex analysts, the Sterling has increased the most among the majors, despite the fact that policy makers are wondering whether the U.K.’s economic recovery will remain on track or be dampened by outside pressures. Today, the central bank’s governor, Mark Carney, will face questions by the Treasury Committee and will offer a report on the economy.
USD/CHF- Unemployed Number Rises
The U.S. Dollar traded higher against the safe haven Swiss Franc as demand for the former was up on expectations that the Federal Reserve may reduce stimulus soon. In Switzerland, the number of unemployed individuals climbed to 4.20 million in the third quarter, after posting at 4.17 in the months of April to June. The Swiss currency remained under pressure as the markets were buoyed by an Iranian agreement which denotes that Iran will scale back on its nuclear activities. According to the latest details, sanctions will be eased in exchange for Iran’s pledge to reduce nuclear enrichment activities.
EUR/JPY- Accord Bolstered Risk
Following an announcement denoting that an agreement was reached with Iran on its nuclear program, harbor currencies declined. The Yen dipped to a four-year low against the Euro and it remained weighed down due to speculation that this week’s announcements will confirm that the Japanese inflation rate accelerated. Analysts predict that November 29th‘s releases will show that consumer prices climbed from the previous year, signaling that deflation may be a thing of the past. The 17-nation currency erased some of its gains after the European Central Bank indicated that it was preparing for negative deposit rates.
Today’s Outlook
Today’s economic calendar is light and shows that the U.S. will report on Building Permits and Housing Starts and CB Consumer Confidence. New Zealand will release the Trade Balance; and Australia will issue data on Construction Work Done.
The Euro traded at session lows against the greenback after Ardo Hansson, a member of the European Central Bank’s Governing Council, suggested that the bank is contemplating the effects of reducing the benchmark interest rates once again, and perhaps opting for negative deposit rates. Mr. Hansson stated that the deflationary pressures are a matter of concern and may convince policy makers to cut interest rates. The British Pound also slumped against the U.S. Dollar, not just as investors speculate over the future of U.S. monetary policy, but also as a result of less than stellar economic news which denoted a drop for Mortgages Approvals, which nevertheless remained at close to a four-year high.
The Yen hovered close to six-month lows versus the greenback and hit near four-year lows against the 17-nation currency on speculation that upcoming macroeconomic fundamentals may show acceleration for the inflation rate. The central bank’s governor, Haruhiko Kuroda, suggested that this provided evidence that the current easing measures are working. Mr. Kuroda indicated that although the measures are aggressive, they will help Japan reach a 2 percent inflation target.
Lastly, the Australian Dollar traded at six-week lows as market investors believe the Reserve Bank may still reduce the cost of borrowing money. Last Thursday Bank Governor Glenn Stevens said that the currency remains overvalued, and an intervention in the markets may be possible. The New Zealand Dollar edged higher versus its U.S. peer as demand for risk assets increased following news of the Iran accord, and as investors anticipate the Federal Reserve may being cutting monthly bond purchases by as soon as December.
EUR/USD- Italian Senate Scheduled To Vote
The Euro weakened against the U.S. Dollar even as risk appetite improved following reports of an Iranian accord after talks in Geneva. The Euro slumped in anticipation of this week’s elections, when the Italian Senate will decide whether to banish the former Prime Minister, Silvio Berlusconi. If he is expelled, Mr. Berlusconi will not be immune from arrest, and may face prison time for tax evasion, abuse of power and other charges. In the U.S., the holiday season begins this week with the Thanksgiving Holiday, and speculators are hoping that Retail Sales will post positive numbers in order to bolster the possibility Fed cutbacks to stimulus. In the E.U. there’s still a possibility for another key cash rate cut, especially as a decline in inflation has raised concerns over deflationary pressures.
GBP/USD- Mortgage Loans Drop
The British Pound slumped versus the greenback as the British Banker’s Association indicated that loan approvals for the purchase of homes fell from a modified 43,182 in September to 42,808 last month. The September numbers were the highest in four years. According to some Forex analysts, the Sterling has increased the most among the majors, despite the fact that policy makers are wondering whether the U.K.’s economic recovery will remain on track or be dampened by outside pressures. Today, the central bank’s governor, Mark Carney, will face questions by the Treasury Committee and will offer a report on the economy.
USD/CHF- Unemployed Number Rises
The U.S. Dollar traded higher against the safe haven Swiss Franc as demand for the former was up on expectations that the Federal Reserve may reduce stimulus soon. In Switzerland, the number of unemployed individuals climbed to 4.20 million in the third quarter, after posting at 4.17 in the months of April to June. The Swiss currency remained under pressure as the markets were buoyed by an Iranian agreement which denotes that Iran will scale back on its nuclear activities. According to the latest details, sanctions will be eased in exchange for Iran’s pledge to reduce nuclear enrichment activities.
EUR/JPY- Accord Bolstered Risk
Following an announcement denoting that an agreement was reached with Iran on its nuclear program, harbor currencies declined. The Yen dipped to a four-year low against the Euro and it remained weighed down due to speculation that this week’s announcements will confirm that the Japanese inflation rate accelerated. Analysts predict that November 29th‘s releases will show that consumer prices climbed from the previous year, signaling that deflation may be a thing of the past. The 17-nation currency erased some of its gains after the European Central Bank indicated that it was preparing for negative deposit rates.
Today’s Outlook
Today’s economic calendar is light and shows that the U.S. will report on Building Permits and Housing Starts and CB Consumer Confidence. New Zealand will release the Trade Balance; and Australia will issue data on Construction Work Done.