The U.S. Dollar traded lower against a number of Forex currencies as demand for safe havens reigned in the market due to reports that violence has escalated in several regions of Iraq. Worries about the Sunni insurgency in the country spurred demand for harbor assets, especially as investors grow fearful of a possible suspension for oil delivery. The greenback was also weighed down by uncertainty over the upcoming Federal Reserve meeting scheduled for tomorrow, as investors hope to obtain clues on the timing for an interest rate hike. On the data front, the Federal Reserve of New York stated that the index which measures Business Conditions showed a hike from 19.01 to 19.28 in June, while economists anticipated a drop to 15.0. The announcement revealed a surge in Manufacturing activities as well as in employment. Other news confirmed that the number of hours worked went up. The greenback rose against its Canadian counterpart despite the fact that crude oil jumped to the highest price in nine months as a result of mounting instability in Iraq.
Gold Prices came close to the highest price in three weeks on the Comex division of the New York Mercantile Exchange. This took place as the unrest in the Ukraine and Iraq bolstered the appeal of harbor assets. Bullion has risen 6.5 percent so far in 2014, mostly as a result of the crisis between Russia and the Ukraine. On Monday, Moscow announced that it would cut the supply of natural gas to Kiev, while in Iraq, insurgents related to Al-Qaeda captured a number of cities and are getting closer to Baghdad. Futures for delivery in August rose 0.6 percent to $1,281.20 a troy ounce during the morning hours in New York; and Gold for immediate delivery surged 0.3 percent to $1,280.37 an ounce in London.
The Euro extended losses versus the greenback before paring its decline. However, the shared currency traded close to the lowest rate in four months subsequent to the announcement of lackluster data, which suggested the European Central Bank may boost stimulus in the months to come. The British Pound rallied on statements by the Bank of England’s Deputy Governor, in which he intimated that if the bank raises the key cash rate it means that policy makers believe the economy has reached a “normal level.”
The Yen rose against the Euro and the U.S. Dollar as the crisis in the Ukraine and Iraq increased the appeal of harbor currencies. The Yen was also bolstered by a report which showed that Sunni insurgents are closing in on the Iraqi capital of Baghdad.
The New Zealand Dollar rose against the greenback and hovered near a five-week high as the markets continued to digest economic releases issued out of the U.S. on Friday, denoting a dip in Confidence. The Australian Dollar inched lower as the Forex exchange turned risk adverse on news that the U.S. may launch an air strike on Sunni insurgents.
EUR/USD- Inflation Continues To Disappoint
The EUR/USD declined to the lowest price in four months after fundamental releases confirmed that the monthly inflation rate slipped 0.1 percent in May, just as forecast, and the year’s inflation continued to post at 0.5 percent. The data disappointed and gave more cause for concern as it posted at the lowest level since November of 2009, except for March of 2014 when it came in even lower. Other news revealed that Core Inflation printed at 0.7 percent. Demand for the greenback was high as risk appetite ebbed in the market due to news indicating that the violence in Iraq continues to increase. Sources announced the arrival of U.S. marines to Baghdad where they intend to protect the Embassy from any attacks by ISIS insurgents.
GBP/USD- Sterling Nears 5-Year High
The GBP/USD continued to trade to the upside and remained near the highest rate in five years. In fact, the pair traded above $1.70 following comments by the Bank of England’s governor, Mark Carney who indicated that the central bank may consider boosting the benchmark interest rate earlier than anticipated. Meanwhile, domestic reports confirmed that asking prices for properties in London declined for the first time in 2014. Mr. Carney is expected to address the BOE’s financial stability officials on the possible need for action should the property market come close to experiencing a bubble.
USD/JPY- Geopolitical Tensions Boost Yen
The USD/JPY declined as geopolitical tensions bolstered risk aversion in the foreign currency exchange. Traders are uncertain on whether the Japanese currency will rise further, and have stated that they’ll continue to monitor the crisis in Iraq and the Ukraine. Meanwhile in Japan, reports showed that corporate taxes are higher than those of China and South Korea; but a number of government officials have voiced their objection to reducing the tax rate unless other sources of revenue can be established. At the moment, a mere 30 percent of the firms are paying corporate national and local taxes. The others have obtained exemptions because they are underperforming. The release also revealed that Japan’s economy is the worse of the developed countries due to the fact that it possesses debt that’s more than 200 percent of its gross domestic product.
NZD/USD- Confidence Remains High
The NZD/USD inched higher after Westpac showed that consumer confidence remained high even though the metrics posted a drop. Investors wonder whether the NZD/USD will remain strong after surging in the past week once the Reserve Bank indicated it will boost the borrowing costs further. This week, the South Pacific nation will post data on economic growth which is expected to be stellar; but the dairy products’ auction could disappoint by showing additional price declines. The Kiwi lost some of its momentum as demand for risk assets declined in the market on news that the violence between Iraq’s military forces and ISIS insurgents has risen.
Today’s Outlook
Today’s economic calendar shows that Switzerland will post PPI. The Euro region will release ZEW Economic Sentiment. The U.K. will report on CPI, Core CPI, the House Price Index, PPI Input and Output. The U.S. will publish Building Permits, CPI, Core CPI, Housing Starts and the Redbook. New Zealand will issue the Current Account. And Japan will reveal the Adjusted Trade Balance as well as the Trade Balance.