Daily Report: EUR/USD, GBP/USD, USD/JPY And AUD/USD : September 16, 2013

The U.S. Dollar depreciated against the majority of its forex peers on Friday subsequent to the publication of what economists considered less than stellar metrics, thereby casting doubts over the Federal Reserve’s next move and the possibility it will reduce stimulus. Retail Sales rose, though not as much as predicted as the Commerce Department stated that sales only rose 0.2 percent in August, adding to worries that the third quarter may not show as much growth as previously anticipated. Separate releases indicated that Consumer Sentiment plunged to a five-month low and posted at 76.8 following a reading of 82.1 last month. The numbers were rather disappointing and they followed reports which revealed that the employment sector added fewer payrolls than forecast. In the days ahead, the markets will keep an eye on the outcome of the central bank’s policy meeting and the press conference in which Fed Chairman Ben Bernanke will announce the bank’s decision on stimulus. Meanwhile, gold prices felt the pressure as demand for the greenback went up and fears over a military strike against Syria ebbed. Diplomatic talks between the U.S. and Russia seemed to produce positive results. Nonetheless, President Barack Obama has indicated that if Syria does not comply by handing over its chemical weapons to international authorities, the U.S. will still forge ahead with its original plan. Futures for December delivery traded at $1,304.80 on Friday in the Comex Division. The shiny metal depreciated by 4.7 percent, marking the largest weekly drop since June.

The Euro traded mixed against the greenback on Friday after the U.S. issued lackluster macroeconomics which raised uncertainty over the future of monetary policy. This week, Germany will post the ZEW Index of Economic Sentiment, an indicator that’s highly anticipated, and the Euro region will publish Consumer Inflation. The British Pound jumped to seven-month highs following a fall in the Unemployment Rate together with a major hike in House Prices –two pieces of data that support the belief that U.K.’s economy was not slowing down. The Swiss Franc also advanced versus the U.S. monetary unit, as reports showed a lower Consumer Confidence and an increase in Retail Sales that was lower than predicted. This week, the Swiss National Bank will publish the Libor Rate.

The Yen rallied versus the U.S. Dollar on doubts the Federal Reserve will cut stimulus given the recent flurry of weak economic data. In the meantime, the Japanese government stated that the economy is emerging out of deflation and suggested that it may in fact be experiencing “moderate” recovery. Monday’s reports confirmed that the country’s economy grew 0.9 percent during the months between April and June, bringing the annualized level of growth to 3.8 percent.

Lastly, in the South Pacific, Australia’s Dollar dipped versus the greenback amid uncertainty over the upcoming FOMC policy meeting. The Aussie was also under pressure after Thursday’s news showed that the Jobs sector lost 10,800 payrolls in August, and the Unemployment Rate climbed from 5.7 to 5.8 percent. The New Zealand Dollar reached a four-month high against its U.S. counterpart before it erased a partial percentage of its gains on speculation that the Fed may not reduce the bond purchases this month. The Kiwi was supported by an announcement from the RBNZ indicating it will maintain the key cash rate at the record 2.5 percent while some bank officials hinted that they may opt for an increase in 2014. The small South Pacific nation will issue metrics on growth this week.

EUR/USD- Euro Tumbles Slightly
The Euro traded a bit lower on Friday against its U.S. counterpart during the European session, but it later gained as the U.S. reported a drop in Consumer Confidence and a lower than anticipated hike in Retail Sales. This Thursday, Germany will issue the ZEW Survey data which posted positive metrics over the past few months. The shared currency stabilized itself versus the greenback at the end of Friday, as investors remain skeptical and anticipate the Federal Reserve may not move ahead with a cut in stimulus.

GBP/USD- Construction And Home Values Boost Pound
The British Pound closed the week at new highs and gained against the U.S. Dollar for a second consecutive week. The positive releases increased speculation that the Bank of England won’t wait to raise the costs of borrowing money, but may do so within the next few months. According to the Office for National Statistics, the House Price index went up to the highest level in more than seven years as new measures bolstered demand. Separate reports indicated that the Unemployment Rate dipped to 7.7 percent from May to July.

USD/JPY- Yen May Decline
The Yen climbed against the U.S. Dollar on Friday, though analysts anticipate that the Japanese currency may drop as policies issued by the Bank of Japan and those of the U.S. central bank continue to diverge. The Yen remained under pressure as the BOJ forges ahead with an unprecedented asset-purchasing program while the FOMC was considering a cut back in stimulus. Furthermore, the yield differential between Japanese and American securities reached the widest level in close to two and a half years, a factor that limited the Yen’s advance. Meanwhile, data out of Japan was positive throughout last week, however, Prime Minister Shinzo Abe still requested that the government to come up with a plan to balance out a sales tax hike. The increase in sales tax now has to be signed into law by the Premier.

AUD/USD- Employment Data Disappointed
Australia’s Dollar had rallied on Monday subsequent to national election results and after China issued stellar economic reports. It traded to the upside as diplomatic efforts to keep the U.S. from attacking Syria rendered some positive results. However, Unemployment news showed a hike in the rate from 5.7 to 5.8 percent, and a cut in close to 11,000 jobs, two issues that weighed on the Aussie currency. This week, the RBA will publish the policy meeting minutes, and the assistant governor, Malcolm Edey, will participate in a panel discussion set up by the Financial Services Institute of Australia. This conference is usually a highly anticipated event by market speculators.

Today’s Outlook
Today’s economic calendar shows that markets will be closed in Japan as the country observes “Respect for the Elderly” Day. In the Euro region, the President of the ECB, Mario Draghi, is scheduled to deliver a speech, while the E.U. reports on CPI, Core CPI and the Labor Cost Index. The U.S. will issue the NY Empire State Manufacturing Index and Industrial Production. And lastly, Australia will publish the Monetary Policy meeting minutes.