Daily Report: EUR/USD, GBP/USD, XAU/USD And USD/JPY : June 27, 2013

The U.S. Dollar traded mixed while commodity currencies such as the Australian and New Zealand Dollars benefitted from improvements in risk appetite. Other currencies, such as the Euro, the Swiss Franc and the British Pound continued to slide to the downside. The U.S. Commerce Department revised Gross Domestic Product for the first three months of the year and showed that the economy didn’t actually grow by 2.4 percent as was predicted, but by 1.8 percent. Economists explained that the prior figures resulted from an overestimation of individual consumption. Metrics confirmed that Personal Consumption rose 2.6 percent, missing expectations for a 3.4 percent hike. The report prompted investors to wonder whether the Federal Reserve will downplay the revision and move ahead with a reduction in stimulus or continue with the current amount of monthly asset purchases. Meanwhile, Gold Futures managed to erase some of their losses after the U.S. announced that its economy expanded significantly less than predicted in the initial quarter of 2013.

The Euro continued to decline against the U.S. Dollar following the release of revised GDP figures which bolstered concerns over the future of U.S. monetary policy. The 17-nation currency remained under pressure as the President of the European Central Bank issued a statement suggesting the bank will adhere to its “accommodative policies” and is prepared to act when necessary. Mr. Draghi asked political leaders from the member nations to look for ways to fuel economic growth. The British Pound also extended losses against the greenback, especially as the Bank of England continued with its bearish rhetoric. Policy maker David Miles suggested the bank should expand on quantitative easing, thereby causing the Sterling to mimic the Euro’s drop.

The Yen advanced for a fourth day in a row against the Euro following a big drop in Chinese equities, and as China’s central bank announced that it would provide liquidity to a number of financial institutions. The Japanese currency rallied versus the majority of its counterparts after the Shanghai Composite Index dipped as much as 1.9 percent.

Lastly in the South Pacific, Australia’s Dollar edged higher against its U.S. peer as Prime Minister Julia Ballard was defeated by Kevin Rudd for the leadership of the country’s Labor party. The Aussie’s gains were limited as demand for the greenback improved following the release of U.S. economic reports which revealed that Consumer Confidence reached the highest level in 5 years. New Zealand’s Dollar rose versus all of its counterparts once China assured the markets that it plans to ease the credit squeeze.

EUR/USD- Euro Trades Below $1.3000
The Euro weakened against the U.S. Dollar and dipped below $1.3000 for the first time in close to four weeks as the European Central Bank’s President, Mario Draghi, indicated that the bank will continue to implement stimulus. The Euro managed to rally for a short period after the U.S. released revised data which confirmed that the country’s economy grew less than forecast in the first three months of 2013. However, the Euro dipped again after the ECB President suggested that departure from the current loose monetary policy is not possible, despite the fact that the bank predicts the region will sustain a “gradual recovery” by the end of 2014.
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GBP/USD- Sterling Low On U.S. Metrics
The British Pound continued to trade to the downside against the greenback as data out of the U.S. showed that the economy expanded less than anticipated in the initial quarter of the year. The numbers reduced expectations the Federal Reserve may begin to cut back on stimulus, and bolstered uncertainty over the direction of the country’s monetary policy. Meanwhile, in the U.K., the Bank of England issued the Financial Stability Report which urged banks, borrowers and insurers to be aware of the potential risks inherent in big hikes in interest rates. The report also suggested that the debt crisis in the Euro-zone is still a real threat to the U.K.’s economy.
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XAU/USD-Gold Rebounds From 34-Month Lows
Gold prices plunged to 34-month lows as improvements in U.S. economic data supported the case for the Federal Reserve to begin cutting back on the monthly asset purchases. However, a revision of the Gross Domestic Product, which showed that the U.S. economy did not grow by as much as expected in the initial three months of the year, prompted Gold Prices to rebound. Gold Futures for August delivery settled at $1,245.95 a troy ounce on the Comex Division of the New York Mercantile Exchange.
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USD/JPY- Yen Benefits From Haven Demand
The Yen rallied against the greenback as uncertainty over the future of U.S. monetary policy reigned in the market following the release of revised GDP data. According to the U.S. Commerce Department, Gross Domestic Product increased at an annual 1.8 percent in the first three months of this year. This is below the prior estimate which indicated the country’s economy grew 2.4 percent. According to analysts, the Japanese currency advanced as investors grew concerned over China’s credit crunch, and it remained strong due to the fact that the country doesn’t rely on capital from abroad to fund the deficits.
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Today’s Outlook
Today’s economic calendar shows that the E.U. will report on M3 Money Supply, Private Loans, Retail PMI, Consumer Confidence, Industrial Sentiment and Business Climate. The U.S. will issue data on Initial and Continuing Jobless Claims, the Core PCE Price Index, Personal Spending, and Pending Home Sales. New Zealand will release Building Consents. Japan will announce Tokyo Core CPI, Tokyo CPI, the Unemployment Rate, Industrial Production, Manufacturing PMI, Retail Sales and Household Spending.