The U.S. Dollar slumped to a two-week low against a basket of Forex majors ahead of key economic reports slated to indicate that the U.S. Inflation rate slowed down. Market traders are anxiously awaiting the Federal Reserve's yearly conference in Jackson Hole, Wyoming, where Chairwoman, Janet Yellen will open the summit with a keynote speech. Meanwhile, tensions in different parts of the world appeared to be heating up. For starters, announcements issued on Friday showed that Ukraine's government forces destroyed a "humanitarian aid" convoy which entered the country overnight. Following the events, Germany's top negotiators convened leaders from the two countries as well as from France in an effort to hold cease-fire negotiations. Today, the Foreign Ministers from the countries involved in the crisis will meet to discuss options. In the Middle East, Hamas continued to launch rockets into Israel. And in Iraq, U.S. planes forged ahead with airstrikes against ISIS militants, while Iraqi Kurds recaptured the nation's biggest dam from said insurgents.
Gold Prices dipped to the downside as speculators watched the developments unfold. Futures for December delivery fell to the lowest price since the beginning of August and traded at $1,306.20 a troy ounce on the New York Mercantile Exchange. This week, investors will pay close attention to the release of the FOMC Minutes and to the speech which the Federal Reserve's Chairwoman will deliver in Wyoming.
The Euro traded steady against its U.S. counterpart after moving up and down like a rollercoaster. Worries over the different conflicts around the globe have kept the market traders on edge. The Euro slipped versus the Yen following low Inflation reports out of the Euro region, which prompted investors to question the European Central Bank's measures and their effects. Mr. Draghi did not expect inflation to deviate far from the expected 2 percent; however, each month, Inflation has disappointed by posting at very low levels. Analysts worry that failure to deliver on inflation could convince several of the member nations to exit the Euro monetary bloc. The British Pound, on the other hand rose against the U.S. Dollar after it traded at a four-month low. This took place after Mark Carney, the Bank of England's governor delivered a televised speech on Sunday. In his statements, he intimated the possibility that policy makers may boost the benchmark interest rate ahead of a wage increase.
The Yen traded higher against the Euro days after the Euro-zone posted lackluster growth data; and it rose against the greenback as market investors await the release of the Federal Reserve's policy meeting Minutes. Analysts believe that should tensions in hot spots around the world bolster risk aversion, the Yen could rally further.
Lastly, New Zealand's Dollar traded steady versus the greenback, while Australia's Dollar traded little changed following the announcement of less than stellar domestic economic news.
EUR/USD-Recovery Remains A Concern
The EUR/USD slumped on Monday as investors remain worried over the lack of economic growth in the Euro region. With the release of disappointing data last week which showed that the economy stagnated in the second quarter, it's expected that speculators will monitor what Mr. Mario Draghi has to say when he meets other central bankers in Jackson Hole, Wyoming. Sources indicate that a meeting was supposed to take place between leaders of the Euro monetary bloc, Finland and Russia to smooth out disagreements with Moscow. Russia has banned the import of E.U. products in retaliation for the sanctions the West imposed, a factor that is seriously impacting the Finnish economy. However, European banks have reiterated they would like to leave the sanctions in place for up to three months. The Danish banks suggested that heating up tensions could hurt the Russian and European economies further. Reports showed that the E.U.'s members approved another tranche of aid in the amount of 1 billion Euros for Greece, after Athens announced it will implement a series of reforms. The funds are aimed at assisting Greece to make bond payments later in August.
GBP/USD- Interest Rate Could Rise Before Wages
The GBP/USD retreated from a four-month low after Mark Carney, the Bank of England's governor, indicated that while increasing salaries is essential, the monetary authorities may not have to wait to see a steady increase in wages to raise the key cash rate. The GBP/USD rallied despite a lack of economic releases, as the U.K.'s economic recovery continues to support the pair. Expert traders say that the pair could see a hike in volatility this week, especially as the U.K. prepares to publish important data on Consumer Prices, Producer Prices and Retail Sales among others. The release of the BOE's Minutes is another important event slated to take place this week. Investors will probably dissect the message in order to assess the timing for a rate increase. The GBP/USD slipped to the downside on Friday after feeling the effects of the Inflation report issued days before. The Minutes suggested that the central bank could boost the borrowing costs in the early part of 2015.
USD/JPY- Yen May Advance
The USD/JPY declined as traders opted for the Yen to take advantage of its recent depreciation. The pair dropped over the past week when demand for harbor assets rose in the market. However, a line-up of Japanese macroeconomic fundamentals disappointed speculators, causing it to slump against several of its counterparts. This week, the markets will pay close attention to a number of releases out of Japan including all Industry Activity and Adjusted Merchandise Trade Balance. Analysts expect that Thursday's report on Manufacturing PMI could have a big effect on the currency pair. And if the geopolitical tensions ease, the Yen may slip as a result.
AUD/USD- Domestic Reports Disappoint
The AUD/USD traded flat in the morning of Monday subsequent to domestic news which confirmed a drop in the sale of motor vehicles. Official announcements divulged that sales fell 1.3 percent in July, following a hike of 1.7 percent in the previous month. According to analysts, Chinese reports due out this week could have a major impact on the AUD/USD even though in the last few days it shrugged off positive releases which pointed to improvement in Chinese Manufacturing activities. China's Manufacturing PMI posted a hike from 51.0 to 51.7 in July, denoting it's still expanding. The Aussie also benefitted from news that an American Oil and Gas firm made what is said to be the biggest oil discovery in the last three decades and the first in the Western region of Australia. The discovery led Carnarvon Petroleum, a partner in the venture, to see double share profits soon after the finding.
Today's Outlook
Today's economic calendar shows that the Euro region will report on the Current Account. The U.K. will issue CPI, Core CPI, House Price Index, PPI Input and Output, and RPI. The U.S. will publish Building Permits, CPI and Core CPI as well as Housing starts. Japan will announce the Adjusted Trade Balance.