The U.S. Dollar rebounded slightly against several of its counterparts as market traders waited for two key speeches to be delivered: one, by Federal Reserve chairwoman, Janet Yellen, and the other, by Mario Draghi, the President of the European Central Bank. Most speculators anticipated that Mrs. Yellen will adhere to a bearish stance. And while several senior policy makers intimated that the central bank could lose credibility by not announcing when it anticipates to raise the interest rate, others mentioned that the slow improvement of the Jobs sector will permit the central bank to hold off until 2015 to raise the key cash rate. Gold prices reached high as sentiment turned risk averse in light on geopolitical tensions; however, on Monday morning, during the American market hours, the shiny commodity erased more than 1 percent in gains. Futures for delivery in August fell to $1,321.10 a troy ounce on the Comex Division of the New York Mercantile Exchange. On Thursday of last week, gold prices surged to $1,346.80 an ounce on fears that the Portuguese banks could default, and spread the crisis throughout the region. Speculators sold off their gold positions as the U.S. prepared for the start of the corporate profit-taking season.
The Euro inched higher against the Yen and the U.S. Dollar as the markets waited to hear what ECB President, Mario Draghi, had to say regarding the latest string of data and Portugal’s troubles. Mr. Draghi has indicated that he may implement new measures to bolster credit, which would include allowing the regions’ banks access to 1 trillion Dollars at cheap rates. Data issued on Monday denoted that Industrial Output fell in three of the region’s major economies. The British Pound fell versus the greenback ahead of Mrs. Yellen’s testimony before lawmakers, and as economists believe that the U.K.’s economic expansion has slowed down.
The Yen depreciated against the U.S. currency and the majority of its counterparts on the possibility that the biggest central banks will maintain their current accommodative measures to ensure demand for high-yielding assets remains strong. In Japan, the central bank started the two-day policy meeting and it’s expected to deliver the rate decision at any time.
Lastly, in the South Pacific, the Australian Dollar traded steady against the greenback as the market’s volume remained light given that there were no key economic releases out of the U.S. and the markets waited to hear what Mrs. Yellen had to say regarding the state of the economy. The same was the case for New Zealand’s Dollar, even though sentiment towards the greenback remained fragile days after the Federal Reserve issued the policy meeting minutes, which failed to offer insight on the timing o a rate hike.
EUR/USD-Industrial Production Drops
The EUR/USD rallied, but its advance was limited due to the fact that ECB President Draghi was scheduled to speak later in the day. Economic releases showed that Industrial Production plunged 1.1 percent in the month of June, causing the yearly rate to come in at 0.5 percent for the Euro region. Furthermore, reports out of Germany, Italy and France also indicated that they sustained declines in Industrial production. Mr. Draghi, who will deliver a statement at the opening of the quarterly hearing of the Economic and Monetary Affairs Committee, is expected to address the fact that the Portuguese banking problems may have a wide impact on the Euro-zone. Portugal emerged from the bail-out program only two months ago. However, its banking troubles rocked the financial markets last week.
GBP/USD- Sterling Rebounds
The GBP/USD regained its footing on a day in which the economic calendar was light. The pair had declined on Friday, when the U.K announced that activities in construction dropped in May, signaling that the economy’s improvement could be slowing down. According to the releases, Construction Output fell by 1.1 percent in May, after posting an increase of 1.2 percent in April. On Thursday of last week, the Bank of England announced it will maintain the costs of borrowing money at 0.5 percent where they’ve been at since the start of the financial crisis, over five years ago. The central bank did not offer a rate statement, but speculators anticipate that the BOE may rise the benchmark interest rates before planned.
USD/JPY- U.S. Posts Budget Surplus
The USD/JPY rebounded after reports showed that the U.S. government sustained a budget surplus for June, and denoted that its deficit is at the lowest level since 2008. According to the Treasury Department, the surplus amounted to $71 billion, after printing a deficit of $130 billion in the month of May. There was no data out of Japan, but a drop in risk aversion prompted the USD/JPY to rally on Monday. At this time, investors await the Bank of Japan’s rate decision. Sources say that the markets don’t expect an increase in stimulus as the bank’s governor, Haruhiko Kuroda has suggested that the economy is improving “moderately.”
AUD/USD- Comments Still Weigh On Aussie
The AUD/USD ticked up slightly while comments by the Reserve Bank’s governor, Glenn Stevens continued to weigh on the pair. The AUD/USD stayed within a narrow range throughout the weekend after Portugal erased the market’s concerns by suggesting that its second largest lender, Banco Espirito Santo will comply with fiscal responsibilities. Mr. Stevens reiterated that the AUD is “overvalued,” but his statements failed to affect the currency.
Today’s Outlook
Today’s economic calendar shows that Japan’s central bank will hold a Press Conference. Switzerland will publish PPI. The Euro region will report on the ZEW Economic Sentiment. The U.K. will deliver data on CPI, Core CPI, PPI Input and Output. The U.S. will announce Core Retail Sales, the Import Price Index, the NY Empire State Manufacturing Index, Retail Sales and the Redbook. New Zealand will issue CPI. And China will post metrics on GDP, Retail Sales and Industrial Production.