The U.S. Dollar traded lower against several majors, but continued to move higher versus Japan's Yen. Optimism reigned in the markets as the People's Bank of China caught investors by surprise last week by announcing the reduction of the interest rates. And in the Euro region, German Business Confidence soared for the first time in almost one year. The greenback was still supported by the publication of the Federal Reserve's minutes days ago, which denoted that the monetary authorities are positive the economy has progressed and may weather any storms brought on by outside sources. The FOMC however, did not offer clues on when it may raise the benchmark interest rate. On the data front, a new study divulged that wages for workers in the Manufacturing sector dropped dramatically, and many positions for factory workers now offer a lower salary than they did in the past. In fact, the release concluded that the average factory worker earns less than someone in the private sector, and the gap is now wider. But the Real Estate market offered positive news. Home Sales climbed to the highest level in over twelve months in October. The National Association of Realtors indicated that Existing Home Sales went up 1.5 percent to a yearly rate of 5.26 million units. In other announcements, the Federal Reserve Bank of Chicago said that the National Activity Index hiked to a seasonal revised 0.14 percent after coming in at 0.29. The index rose less than predicted in October.
Gold prices rose at the end of Friday, but dipped on Monday as the U.S. Dollar gained versus most of its counterparts. Futures for delivery in February erased 0.31 percent during the European trading hours and dipped to $1,194.70 a troy ounce. At the end of last week, the shiny commodity surged to $1,207.60 a troy ounce, the most since October 30th. Releases out on Monday showed that market traders increased their hawkish speculation over Gold for the week that concluded on November 21. The release revealed that 63.8 percent of traders believe that the shiny metal could rally, and they positioned themselves to capture gains should this take place.
In the Euro region, the central bank's policy makers are scheduled to meet this week in order to address how they'll handle stimulus in the months ahead. The Euro rose versus several of its peers on speculation that the European Central Bank could implement quantitative easing to eradicate deflationary pressures. The Euro gained against the U.S. Dollar and retreated from close to a twenty-four-month low as Germany announced that the index, which gauges Business Sentiment, rose in November. Furthermore, Fitch Ratings stated that it will continue to rank Greece with a B, as the nation is maintaining a "stable outlook" while adhering to fiscal responsibility. However, chances are that the loan review which is scheduled for the end of 2014 may be postponed until 2015. Mario Draghi, the President of the central bank reiterated that whatever needs to be done will be done in order to ensure the Euro region's economy begins to see steady growth.
The British Pound spiraled to the downside in anticipation of upcoming economic news which could convince the Bank of England that this is not the ideal time to raise the borrowing costs. Traders believe that the next line-up of reports could turn out to be disappointing; one of them is slated to reveal a decline in home loans.
In Switzerland, the focus is on the November 30th referendum, when the people will vote on whether they would like their central bank to boost its gold reserves. Many refer to it as the "bullion referendum." The President of the Swiss National Bank, Thomas Jordan has indicated that prompting the bank to hold a certain percentage in gold is risky for the economy. Mr. Jordan intimated that the initiative could weaken the central bank and make it almost impossible for the bank's officials to intervene during a crisis. Those who favor the initiative said that a "yes" vote would force the repatriation of billions of gold kept in Canada and in the United Kingdom, a factor that would help the Swiss National Bank preserve the country's wealth.
The Yen fell towards the lowest price in seven years yet again, and depreciated against sixteen of its counterparts as the biggest central banks around the world have increased stimulus, ebbing the appeal of harbor assets.
The Australian Dollar remained more or less unchanged against the greenback. The Aussie gained on Friday after China announced the reduction in the lending rate. The news elated the markets especially since the People's Bank had been reluctant to make such a bold move. The Aussie failed to react to negative reports divulging that iron prices continued to slip to the downside and plunged below $70 a ton for the first time in five years. New Zealand's Dollar rose against its U.S. counterpart but the advance was limited as market traders still favored the greenback. The Kiwi was supported by news out of China, and by releases confirming that annual immigration climbed to a record high for the third month in a row in October. The increase came about as a result of an influx of students from India, and the fact that more Tasmanians decided to vacation at home rather than travel to Australia. Tourism jumped 8 percent last month.
EUR/USD- Germans More Optimistic
The EUR/USD rose on Monday as news out of Germany signaled a rebound in sentiment. Official data showed that confidence improved this month, breaking a cycle of six consecutive declines, suggesting that the region's largest economy could be recovering. The IFO Business Climate Index which gauges confidence by surveying approximately 7,000 companies posted at 104.7 after coming in at 103.2 in October. Germany's economy has been severely affected by the Euro-zone's slowdown and by the drop in exports to Russia. In the months of July through September the German economy only expanded 0.1 percent, barely averting a recession after shrinking 0.1 percent in the second quarter. One of the IFO's economist's, Klaus Wolhrabe stated that Germany has also benefitted from a decline in oil prices. He added that it's too soon to say this will be the established trend, but it's a good sign. In the last week, the ZEW gauge on Investment Confidence soared impressively. Other domestic data revealed that the Current Assessment Index went from 108.4 to 110.0 in November, and the Business Expectations Index which measures the attitude of entrepreneurs towards business opportunities for the next six months inched up from 98.3 to 99.7.
GBP/USD- Euro-Zone Stress Could Hurt U.K.
The GBP/USD declined for a second day after the British Finance Minister offered comments suggesting that the U.K.'s economy remains vulnerable due to the stresses of the Euro region's economic crisis. Meanwhile, a number of investment firms have predicted that the Sterling could reach new levels over the next few years, and perhaps reach a high not seen since the turn of the century. The GBP/USD remained under pressure days after news that the anti-E.U. political Party gained a second seat in Parliament, a factor that could change things in the May elections. The currency pair was also affected by lackluster fundamentals posted on Friday revealing that Net Borrowing in the Public Sector went up, while investors predicted it would go down. Speculators anticipate that the Bank of England could leave the key cash rate at 0.5 percent, especially if this week's data disappoints. But economists predict that reports may show an increase in the third quarter's Gross Domestic Product.
USD/JPY- Yen Falls Fast
The USD/JPY remained to the upside and traded at the highest rate since August of 2007, while investors wonder if the pair will continue to soar in the days ahead. Japan's financial markets closed for a holiday on Monday Investors are still recovering from last week's news, officially declaring the country in a recession. Shinzo Abe, the Japanese Prime Minister followed the negative announcement by stating that he will call for elections in December, and the government will postpone the next sales tax increase. Taro Aso, the nation's Finance Minister has voiced his concern over the fact that the currency has toppled quickly. Japan has tried to boost inflation to reach the central bank's 2 percent target, and many say that a weak Yen could bolster growth.
AUD/USD- Aussie Extends Advance
The AUD/USD rallied on Monday as China, Australia's main trade partner cut the borrowing costs for the first time since summer of 2012 to boost the nation's economy. The Chinese central bank has attempted to bolster growth using several methods, including the implementation of a medium-term loan facility, but nothing has produced impressive results. The AUD/USD showed no reaction to news showing that iron ore slipped to the lowest level in five years, and plunged below $70 a ton. Iron for immediate delivery to the Chinese port of Tianjin traded at $69.80 a ton.
Today's Outlook
Today's economic calendar reveals that the Euro region will report on German GDP and Spanish PPI. The U.S. will issue GDP as well as Real Consumer Spending, the CB Consumer Confidence, and S & P/CS HPI Composite. Lastly, Australia will post metrics on Construction Work Done.