The U.S. Dollar traded steady against most of its Forex counterparts as the markets anxiously awaited Fed leader Janet Yellen's policy statement. Many investors were happy to stay on the sidelines as the central bank wrapped up its two-day policy meeting. Analysts predicted that policy makers would adhere to their cautious stance, which would translate into slight fluctuations throughout the currency exchange. The Fed was also predicted to announce the conclusion of the monthly bond-buying program, but many investors, who were anticipating the move, still kept an eye on the FOMC to gauge the overall tone of the statement. Many market traders still remain uncertain about the Fed's next move and hoped to gain some insight as to when the rates could go up. However, with the U.S. issuing mixed fundamentals, and inflation remaining below the bank's target, it's very likely that the costs of borrowing money may not go up until the fall of 2015. The monetary authorities will track the progress the economy makes before they decide to raise the key cash rate. On the data front, the U.S. published dismal numbers of Orders for Durable Goods in the past month. Core Durable goods slumped 0.2 percent, falling for a second time in three months. The good news came from the Conference Board, as it stated that the Consumer Confidence Index read at 94.5 for October, denoting a sharp increase from 86.0. This showed that confidence among consumers advanced to the highest level in seven years. The greenback extended losses later in the day on signs the U.S. economy has sustained an uneven improvement, suggesting that the Federal Reserve could continue to push back the timing for a rate hike.
Gold Futures for December delivery remained little changed ahead of the Fed's announcement. Contracts for delivery in December settled at $1,229.00 a troy ounce during the European trading hours. The shiny metal had plunged to $1,222.20 a troy ounce on Tuesday after the greenback fell following lackluster economic announcements. Once the American market opened on Wednesday, Gold Futures plummeted to $1,227.40 a troy ounce on the Comex.
In the Euro-zone, a survey conducted by the European Central Bank indicated that bank loans went up as the financial institutions eased their lending regulations. But still, as economists indicated, the credit standards continue to be the tightest on record. The survey pointed to a jump in demand and banks anticipate higher lending in the months ahead. The Euro rallied against the Yen and the U.S. Dollar. The shared currency steadied later in the day as the markets waited for the Federal Reserve to wind down its policy meeting.
The British Pound declined against the U.S. currency after the latter gained momentum before the FOMC statement was issued. Reports out of the U.K. indicated that Prime Minister, David Cameron refused to pay 2.1 billion Euros into the European Union's budget, denoting his intent to change the agreement with the Euro monetary bloc. Sources say that the E.U. could impose fines on the United Kingdom for non-payment. Mr. Cameron intimated that if he is re-elected, he would hold elections so that Brits can decide if they wish to withdraw the U.K. membership from the E.U.
The Yen is projected to rise against the U.S. Dollar, but for now it traded lower. It also dipped against the Euro despite macroeconomic fundamentals which printed better than anticipated. In Japan, reports revealed a hike in Industrial Production as well as in Retail Sales. The Yen rebounded later in the session.
The Australian Dollar traded to the upside against its U.S. peer and the New Zealand Dollar also gained, and remained strong after domestic news divulged a rise in Business Confidence. Investors are now waiting to see what the Reserve Bank will say in regards to interest rates.
EUR/USD- Chief Economist Offers Opinion
The EUR/USD rose as the greenback weakened slightly ahead of the conclusion of the FOMC's policy meeting. In the Euro region, the central bank's chief economist, Peter Praet suggested that the Euro-zone's economy is not in danger of falling into deflation even though consumer prices have plunged to the lowest level on record. Mr. Praet indicated that policy makers would remain vigilant so as to prevent any crisis from resurfacing. Germany issued positive data indicating a hike in import prices for the last quarter. Germany has posted lackluster economic reports denoting that its economy has slowed down. For such reason, Euro region officials have asked the German government to boost spending. But German leaders oppose such measure as they are strong advocates of fiscal tightening. Sources say that this difference of opinions is increasing tensions between E.U. and German officials. The country's Chancellor, Angela Merkel, and Finance Minister, Wolfgang Schaeuble are not in favor of more spending. They worry that the European Central Bank may have to implement further stimulus and purchase sovereign bonds if it fails to boost lending.
GBP/USD- Sterling Up After Data Published
The GBP/USD rose after the U.S. issued economic news which left much to be desired, which revealed that orders of Durable Goods such as toasters dropped in September. The Commerce Department indicated that there was a decline of 1.3 percent, missing forecasts for an increase of 0.5 percent. In addition, August's number of orders was revised and now show that there was a fall of 18.3 percent, not the previously announced 18.4 percent dip. The news suggested that companies are acting cautiously and guarding their capital while holding on to their equipment. The report denoted that purchases of computers and other machinery went down, but demand for automobiles stayed unchanged. The GBP/USD traded little changed as investors waited for data on U.K. Mortgage Approvals. On Tuesday, the Deputy Governor of the Bank of England stated that while there have been ample signs of improvement in the British economy, the country has seen a slowdown. He added that the U.K. may see a further loss of momentum as the global economies slow down. He asked the central bank to tread with caution as it makes its decision on when to raise the benchmark interest rate, especially since there continues to be a slack in wage growth.
USD/JPY- Retail Sales Surge
The USD/JPY rose, but this may soon change according to some trading analysts. Some experts anticipate that as market traders speculate over the timing of a rate hike in the U.S., the Yen may rally. The currency pair remained to the upside even after Japan announced that Retail Sales went up for a third month in a row, providing evidence that the country could weather another sales tax increase. Spending climbed 2.3 percent on an annual basis last month. It had posted a 1.2 percent hike in August, and this past month, it surpassed economists' predictions for a rise of 0.6 percent. On a monthly basis, Retail Sales went up 2.7 percent, three times the estimate. The USD/JPY erased gains after Japan published preliminary news indicating that Industrial Production surged 2.7 percent, more than the forecast 2.2 percent. The metrics signal that Output climbed at the quickest pace since the start of the year.
NZD/USD- Investors Await RBNZ
The NZD/USD rallied before the Federal Reserve issued the rate statement. Meanwhile, investors wondered whether the Reserve Bank of New Zealand would issue comments on tightening measures. At the most recent meeting, the central bank left the key cash rate at 3.5 percent and voiced its concerns about the real estate sector. Policy makers were optimistic as construction picked up, and exports increased. However, inflation has dipped and this has caused the monetary authorities to go back to the drawing board to reassess their position. Analysts anticipate that the Reserve Bank may leave the rates at the current level. The question is whether the economy has offered enough signs of improvement for the policy makers to lay off their easing bias. On the data front, ANZ Business Confidence surged from 13.4 to 26.5 in October.
Today's Outlook
Today's economic calendar shows that the U.K. will report on Nationwide HPI and GfK Consumer Confidence. The Euro region will issue data on German Unemployment, Business Climate, and Consumer Inflation Expectations. The U.S. will publish Initial and Continuing Jobless Claims, as well as GDP. New Zealand will announce Building Consents. Japan will provide metrics on Household spending, National Core CPI, Tokyo Core CPI, CPI and the Unemployment Rate. Australia will release PPI and Private Sector Credit.