The U.S. Dollar traded higher against most of the Forex majors, while market traders anxiously awaited the publication of U.S. CPI and Core CPI data. Analysts predicted that a negative report would impact the greenback. Despite the fact that the Federal Reserve is slated to wind down the asset-purchasing program this month, soft price growth could prompt the Fed to leave the key cash rate at the current low for quite some time. Sentiment in the market remained fragile as reports out of the Euro region indicated that eleven of the Euro monetary bloc banks could fail the stress test that the European Central Bank conducts every year, potentially including banks from Italy, Greece, and perhaps even Portugal. The main concern is that German banks may make the list this year. If the releases due out on Sunday denote that only minor financial institutions failed the test, the Euro is likely to rebound. The greenback extended its advance after the Department of Labor revealed that consumer Price Inflation climbed 0.1 percent last month, just as predicted. Core Consumer Prices, which do not take into consideration volatile staples like food, went up 0.1 percent, while economists anticipated they would rise 0.2 percent.
Gold Prices hovered close to a six-week high on the likelihood that the European Central Bank will take action to bolster growth. Reuters announced that the central bank may buy corporate bonds; but many of the European Central Bank members said that this is not the case. Futures for delivery in December reached $1,249.30 a troy ounce on the Comex during the European market hours.
The Euro sustained losses on Wednesday, falling below $1.2700. The shared currency remained under pressure despite the lack of fundamental reports out of the region. But speculators await the E.U. Services and Manufacturing PMI reports; they anticipate that these could turn out to be disappointing. The Euro depreciated against the Yen on speculation that today's announcements could divulge a decline in manufacturing activities.
The British Pound went down against its U.S. counterpart as the minutes from the Bank of England's policy meeting showed that the monetary authorities are negative about the global economies, and predict that the loss of momentum in Europe's economy could impact the U.K. The tone of the minutes gave way to expectations that the central bank may not raise the borrowing costs for now.
In Japan, the news was mixed and showed a hike in the Trade Deficit while also confirming that exports went up as a result of an increase in iPhone shipments. The bad news came from the import report, as it denoted a surge due to boosts in gas purchases. The Yen nonetheless rebounded against the greenback and the Euro.
The Australian Dollar rallied following the release of Inflation data for the third quarter. But the Aussie's gains were capped as the minutes from the RBA's policy meeting continued to weigh on the currency, denoting that the RBA has shifted its attention to the market's volatility and global economic growth. The bank's officials are worried about China, Japan and the E.U. For now, the central bank said it will leave the benchmark interest rate at the present level, at least until the economy appears to stabilize. Governor, Glenn Stevens suggested that the accommodative stance of the bank should contribute to the nation's economic prosperity. Rate increases, he added, would heat up the real estate market, which already saw a hike in house prices of 14.3 percent. New Zealand's Dollar advanced against the greenback even though demand for the latter remained strong. In the small South Pacific nation, sources indicated that the employment sector continues to improve, and the construction industry is gathering momentum. Inflation news out of Australia supported the Kiwi.
EUR/USD- Budget Plans May Violate E.U. Rules
Reports denoting that the European Central Bank could start purchasing corporate bonds caused the EUR/USD to plunge. Investors viewed this as a step towards improving the E.U.'s economic outlook. However, central bank officials suggested that they have no plans to engage in such action. Meanwhile, sources indicated that the Euro-zone is about to reject the budgets of a number of countries. The European Commission is preparing to tell several nations that their budget plans are not in line with the periphery's regulations. Among the countries about to receive such notification are Italy, France, Malta, Slovenia and Austria. France and Italy are said to be working towards reducing the deficit, and although analysts say there's room for compromise, that may not be the case. The EUR/USD slumped further after the U.S. announced that Consumer Prices went up 0.1 percent in September, meeting economists' forecasts.
GBP/USD- BOE Minutes Somewhat Negative
The GBP/USD declined as the Bank of England issued the minutes from its most recent policy meeting, which revealed that the monetary authorities remain divided on whether to raise the borrowing costs. Two of the members voted again to boost the rate, while the others stated that 2015 would be the appropriate year in which to move ahead with a rate hike. Most economists were surprised that the vote against the increase was not unanimous, given the latest string of disappointing economic reports. The minutes reflected the members' pessimism and suggested that the nation's inflation could continue to dip to the downside. Market traders will now shift their focus to Friday, when the U.K. is scheduled to publish growth data for the third quarter.
USD/JPY- Exports Rise
The USD/JPY steadied after dropping in the early trading sessions. On the data front, Japan announced that the Trade Deficit printed at 958 billion Yen for last month, more than expected. The report offered some positive news, including the fact that the export sector recovered by rising 6.9 percent, which is more than analysts predicted. The numbers are said to be positive for Prime Minister, Shinzo Abe, who has been campaigning to boost the manufacturing sector. But not everything about the report was positive. Imports went up by 6.2 percent. They denoted a surge in gas imports. This caused the deficit to expand 1.6 percent from the year before. Economists say that the expansion of the trade deficit has to do with multinational companies investing abroad, and this, they believe reduces the effects of the weaker Yen in bolstering exports.
AUD/USD- Inflation Surges
The AUD/USD rallied as Inflation reports for the third quarter printed higher than anticipated. The release pointed to a 0.5 percent increase, more than the 0.4 percent forecast. On a year-over year basis, Consumer Price Inflation dipped to 2.3 percent after it reached 3.0 percent in the second quarter. The AUD/USD has traded up and down throughout the past few days, as sentiment in the Forex market has swung between positive and negative. Meanwhile, comments in the RBA minutes issued on Tuesday weighed on the Aussie, denoting that the policy makers still consider the currency to be overvalued.
Today's Outlook
Today's economic calendar shows that the Euro region will report on Services and Manufacturing PMI as well as on Consumer Confidence. The U.K. will issue data on BBA Mortgage Approvals, Core Retail Sales, Retail Sales, and CBI Industrial Trend Orders. The U.S. will release the Initial and Continuing Jobless Claims and House Price Index. New Zealand will publish the Trade Balance. And China is expected to provide metrics on House Prices.