The U.S. Dollar appreciated against the majority of its trading counterparts on speculation that recent data pointing to improvements in the economy could give the Federal Reserve sufficient reasons to boost the benchmark interest rate earlier than planned. The U.S. Dollar extended gains against the Yen and reached the highest price since August of 2008 as speculators waited for economic news out of the U.S. The greenback disregarded less than stellar fundamentals published on Tuesday revealing that Consumer Confidence dipped in September, and Home Prices climbed by less than forecast, in July. At this time, investors hope that Friday's Non-Farm Payrolls will meet their predictions and post the addition of more than 200,000 positions for another month in a row. On the data front, Wednesday's news issued by the Payroll processing company, ADP indicated that Non-Farm Private Employment surged more than predicted in the past month. 213,000 payrolls were created in September, beating forecasts.
Meanwhile, Gold slipped to the lowest level in ten months during the European market hours. Futures for December delivery plunged to $1,206.60 a troy ounce after closing on Tuesday at $1,211.60.
The Euro continued to post losses even though Spain and the E.U. announced that the Manufacturing PMI met expectations. Reports out of Italy indicated improvements, causing the index to post in expansion territory. However, the Euro remained under pressure after dropping a major amount of pips on Tuesday. September was a lackluster month for the currency as it erased 500 points against the greenback. It reacted strongly to the region's data on Consumer Price Index. The metrics denoted that the E.U.'s Inflation levels have remained below 1 percent for a year. In addition, Germany's CPI printed flat for a second month in a row. Sources say that the European Central Bank is feeling the pressure and it's expected to take action; but Mario Draghi, the President of the central bank has stated that there's no magic answer for the woes dampening the Euro-zone's growth. The British Pound declined against the greenback as downbeat Manufacturing PMI impacted the U.K.'s currency. Still, market traders are keeping an eye on the Bank of England for clues on when it may raise the key cash rate.
The Yen added to losses against the U.S. Dollar, and weakened even more after domestic reports pointed to a mixed outlook for its economy. For starters, the Bank of Japan published the Tankan Survey denoting that higher costs have hurt households. The survey also revealed that sentiment among manufacturers climbed despite the lackluster performance of exporters. The central bank is predicted to keep stimulus unchanged when it meets on October 6th.
The Australian and New Zealand Dollars depreciated against their U.S. counterpart. Their decline took place after China issued disappointing metrics which signaled a slowdown in Manufacturing activities. The South Pacific currencies shrugged off news that the People's Bank relaxed property lending practices. These are aimed at helping second home buyers. The Aussie was also impacted by a smaller than expected hike in Retail Sales.
EUR/USD-Factory Data Slows
The EUR/USD declined, touching a session low following the release of data out of the Euro region suggesting that activities in the Euro-zone's factories have dropped to the lowest level in fourteen months. The EUR/USD slumped as Markit Economics said that factory orders declined for the first time since June of last year, and signal a possible decline in inflation in the months ahead. Germany's Manufacturing PMI plummeted from 50.3 to 49.9 indicating that the activities are now in contraction territory, denoting no growth. Meanwhile, Italy was pleased to announce that its Manufacturing sector went into expansion territory after the government lowered growth forecasts. Other positive news came from the Spanish nation where the Bank of Spain stated that the Gross Domestic Product could post 2 percent growth by the end of this year. And lastly, the E.U. confirmed that the Manufacturing Purchasing Manager's Index recorded the lowest data since 2013, with a reading of 50.3. A plunge in inflation levels has increased speculations the European Central Bank could expand stimulus. . Analysts say that the EUR/USD saw the worst quarter since 2010 as the central bank attempted to improve the balance sheet and reduce the costs of borrowing money to bolster growth. The ECB's policy makers are meeting today and are expected to leave the interest rates at its current low.
GBP/USD-PMI Disappoints Market
The GBP/USD fell on Wednesday after announcements out of the United Kingdom revealed that the Manufacturing sector has slowed down. Reports published by Markit indicated that the Manufacturing Purchasing Manager's Index slipped to 51.6 in September, below August's posting of 52.2. The release issued in August was modified as it previously showed a hike to 52.5. Economists say that with mixed data, the policy makers will have to tread with caution as they assess whether to raise the main interest rate.
USD/JPY-Japan Publishes Mixed Metrics
The USD/JPY rallied beyond the key 110 level after the U.S. ADP Firm revealed that employers added over 200,000 payrolls for a sixth consecutive month, providing the Federal Reserve with evidence to boost the borrowing costs. In the meantime, the Bank of Japan issued the Tankan quarterly Business Survey for September. It indicated that the devaluation of the Yen supported the Tokyo Equities Exchange. It also revealed that high costs have hurt households, causing them to spend less. Sentiment among large manufacturers climbed to +13 after surging to +12 in June. This denoted that the drop in exports and in local demand was offset by the currency's weakening and the rise in stocks. The Bank of Japan is scheduled to hold a two-day policy meeting starting on October 6th. At said time, the monetary authorities will decide on whether to expand easing. Speculators believe that they'll leave stimulus at the current levels.
AUD/USD-Retail Sales Drop
The AUD/USD slumped after September's Manufacturing Activities' Index dropped to 46.5. Other news indicated that Retail Sales rose less than anticipated, causing the pair to slump to a nine-month low. The official metrics divulged that Retailers sold 0.1 percent more in the month of August, while economists forecast they would see an increase of 0.4 percent. The Aussie remained under pressure after China announced that the Manufacturing PMI stayed at 51.1 in September, while analysts predicted it would decline to 51.0. Other news indicating that iron ore, the nation's main export is struggling to recoup its footing affected the AUD/USD.
Today's Outlook
Today's economic calendar reveals that the U.K. will report on Construction PMI. The Euro region will issue PPI and the Interest Rate Decision. The U.S. will announce Initial and Continuing Jobless Claims, as well as data on Factory Orders. Lastly, China will provide metrics on Non-Manufacturing PMI.