Daily Report: EUR/USD, GBP/USD, XAU/USD And AUD/USD : July 05, 2013

Despite the fact that U.S. markets were closed on Thursday in observance of Independence Day, the foreign currency exchange saw some big moves. The U.S. dollar rallied to five-week highs against the British Pound and the Euro surpassing key psychological levels. Today, market investors will shift their focus to Non-Farm Payroll reports, which are expected to show that U.S. employers added 165,000 workers in the month of June. Wednesday’s releases indicated that private sector employers added 188,000 payrolls in June, exceeding previous forecasts. In the meantime, Gold Futures dropped subsequent to comments by the European Central Bank’s President, Mario Draghi, in which he pledged to maintain the benchmark interest rate low for some time to come. Mr. Draghi reiterated that the central bank plans to keep its “accommodative policies” for as long as needed.

In the Euro region, the shared currency plunged below the key $1.3000 level and dipped the most in close to three weeks versus the Yen as ECB President Draghi indicated that the bank will adhere to its “accommodative policies.” According to analysts, his comments came about because of the recent volatility seen in the costs of borrowing money, and the bank’s desire to distinguish itself from the Federal Reserve, which is intent on reducing stimulus. ECB policy makers want investors to know they’re prepared to expand easing if the bond markets continue to show volatility or the economy displays signs of weakness. The British Pound slipped 0.4 percent versus all of its counterparts after the Bank of England stated that the increases in market rates may affect growth in a negative manner. Furthermore, the Monetary Policy committee announced it will leave stimulus at 375 billion Pounds and the key cash rate at 0.5 percent. The Sterling remained under pressure as policy makers used a rather more bearish tone than market investors expected.

And while the U.S. markets took a breather for the Holiday, the greenback rose against the Yen. In Japan, the central bank’s Governor, Haruhiko Kuroda, stated during a bank conference in Tokyo that the ongoing monetary policies were bearing positive results. According to Mr. Kuroda, Japanese Indicators have shown improvement, especially the Tokyo Core CPI which posted above zero.

Lastly, in the South Pacific, Australia’s Dollar rebounded after having reached the lowest level since September of 2010 on speculation the currency depreciated too fast; but its gains were limited as domestic news confirmed that the number of Permits issued for building or renovating properties dropped in May. The New Zealand Dollar remained more or less unchanged versus the greenback.

EUR/USD- Portugal Weighs On Sentiment
The Euro dropped to a five-week low against the U.S. Dollar, not just as a result of comments issued by ECB President Draghi, but also due to the ongoing situation in Portugal. The political crisis now facing the Portuguese government is weighing on the shared currency and increasing concerns it may worsen the debt crisis. The country committed to a bailout agreement back in 2011, but since then, the economy hasn’t shown signs of improvement. Its unemployment rate has reached 18 percent, and to make matters worse, Finance Minister Vitor Gaspar, who was in charge of implementing austerity measures, tendered his resignation on Monday. Meanwhile, the European Central Bank left the benchmark interest rate at 0.5 percent. Mr. Draghi suggested the Euro-zone’s economy still faces risks which could dampen growth.
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GBP/USD- Pound Plunged Most Since 2011
The British Pound fell to a five-week low against the U.S. Dollar after the U.K.’s Monetary Policy Committee refrained from expanding the quantitative easing program, and left the key cash rate at 0.5 percent. According to analysts, the new governor of the Bank of England, Mark Carney used a tactic other central bankers have utilized in the past, and issued extensive statements, in an effort to offer transparency. The BOE indicated that while the economy has shown signs of improvement, its recovery pace has been slow by ” historic standards.”
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XAU/USD-Gold Drops Before Jobs Reports
Gold prices declined in the heels of U.S. Non-Farm Payroll reports as investors hope to get clues as to what the Federal Reserve will do regarding U.S. monetary policy. Gold prices continued on a downward trend after the European Central Bank announced its plan to maintain the costs of borrowing money low for some time to come. Gold for immediate delivery dipped 0.4 percent and settled at $1,247.66 a troy ounce in London; and Gold Futures for August delivery settled at $1,246.60 on the Comex Division of the New York Mercantile Exchange.
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AUD/USD- Building Approvals Fall
Australia’s Dollar rallied against the U.S. currency as market investors believe the currency dropped rather quickly, and the Reserve Bank may cut the benchmark interest rate. The Aussie strengthened further despite reports, which indicated that Building Approvals slipped 1.1 percent in May after they posted a 9.5 percent increase the previous month.
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Today’s Outlook
Today’s economic calendar shows that Japan will report on the Leading Index. Switzerland will issue CPI. And the U.S. will publish data on Average Hourly Earnings, Non-Farm Payrolls, the Unemployment Rate and Private Non-Farm Payrolls.