The US Dollar weakened against the majority of its Forex counterparts as risk appetite improved in the markets despite ongoing crises around the globe. On Tuesday, a number of E.U. leaders indicated that they will expand the list of Russian individuals and firms which will have their assets frozen and their visas cancelled. U.S. President, Barack Obama indicated that tighter economic sanctions may prompt Russia to cooperate with the international organizations in the investigation of the downing of Malaysian flight 17. Secretary of State, John Kerry, met with Hamas leaders and is hoping for a cease-fire. However, Several U.S. airlines have announced they will not be flying into Ben Gurion Airport due to the dangers posed. With sentiment improving in the foreign exchange, gold prices remained above a three-day low. Investors are assessing the tensions around the world and waiting for the U.S. to issue further economic reports. On Tuesday, the U.S. announced that Home Sales rose to the highest level in eight months. Bullion for immediate delivery jumped 0.2 percent to $1,309.19 an ounce during the morning hours in London; and Futures for December delivery increased slightly to $1,311.60 a troy ounce on the Comex.
The Euro remained under pressure and stayed close to a two-month low against the U.S. Dollar while speculators awaited what they believe will be lackluster Services and Manufacturing reports out of the E.U. And while policy makers are ready and willing to augment stimulus to fight deflation, Germany has stated that it’s opposed to having a weaker Euro. Germany’s government has voiced its dissatisfaction with Mr. Draghi’s aggressive strategies, especially since the measures are proving to be slow in rendering results. The British Pound remained little changed after the Bank of England published the Monetary Policy Meeting minutes, which showed an even vote between the monetary authorities in regards to raising the borrowing costs.
In other foreign currency reports, the Yen posted a slight drop against the greenback as risk aversion ebbed even though the tensions in the Ukraine and the Middle East are still palpable. The Japanese currency stayed to the downside as the Fed prepares for its yearly economic symposium in Jackson Hole, Wyoming later next month.
Lastly, in the South Pacific, market traders await New Zealand’s rate decision as speculation over a rate hike benefitted the Kiwi. Australia’s Dollar also inched up against the U.S. currency. This was caused by positive news showing that inflation rose at a fast pace and is now at a level which the Reserve Bank hoped to attain.
EUR/USD- Economists Express Concern
The EUR/USD traded at the lowest rate in eight weeks while economists worry that the newly implemented measures by the European Central Bank are not providing quick results. Experts say that the economy is still weak and are concerned that it could deteriorate further. Many say that the sluggish economy could be due to the fact that the Federal Reserve has reduced stimulus while the ECB implemented unprecedented measures to bolster growth. The drop of the EUR/USD raised expectations the central bank could increase easing.
GBP/USD- BOE Issue Minutes
The GBP/USD traded close to the same level as it did on Tuesday even after the Bank of England released the minutes from its last policy meeting, which revealed that the decision on whether to increase the interest rate or leave it unchanged was debated between policy makers, who also showed concern over the fact that wages are still lagging while inflation climbed to 1.9 percent in the month of June. With growth in the jobs’ market and sluggish salaries, the bank has had a difficult time gauging the exact percentage of slack found in the labor sector. Many of the bank’s officials worry that if they raise the key cash rate too early they could destabilize the economy. On the data front, the U.K. posted a broad surge in Mortgage Approvals. According to the British Bankers Association, Home loans went up to 43,300 after coming in at 41,900 in May.
AUD/USD-Rate Of Inflation Quickens
The AUD/USD advanced to the highest rate in one-and-a-half weeks subsequent to news revealing a hike in Consumer Price Inflation, and as a result of improved market sentiment. The pair rose after domestic reports confirmed that the country’s consumer Price Inflation climbed 0.5 percent in the months of April through June, following the initial quarter’s rally of 0.6 percent. On a year-over-year basis, CPI surged to 3.0 percent, while economists believed it would only go from 2.9 to 3.1 percent. Analysts say this may prompt the Reserve Bank of Australia to reduce the benchmark interest rate since inflation is now between 2 and 3 percent, the bank’s target.
EUR/JPY- Euro Continues To weaken
The EUR/JPY declined further as investors have grown weary of the effects the geopolitical tensions could have on the economic recovery of the Euro region. They’re also concerned that high energy costs could negatively affect the E.U. The Yen benefitted slightly from a short-span of risk aversion, though the pair is still within a narrow range given fluctuations in sentiment. In Japan, the Cabinet indicated that the economy may grow 1.2 percent in the fiscal year, less than the previously forecast 1.4 percent. The government also suggested that Gross Domestic Product could post a hike of 3.3 percent in the present fiscal year which runs through March of 2015 as the central bank’s monetary easing measures appear to be boosting growth. The cabinet went on to say that if the data proves to be correct, the GDP would top the adjusted inflation rate for the first time in close to two decades.
Today’s Outlook
Today’s economic calendar shows that the Euro region will publish Services and Manufacturing PMI. The U.K. will issue data on Retail Sales, Core Retail Sales, and the Index of Services. The U.S. will publish Initial and Continuing Jobless Claims, and New Home Sales. Japan will provide the Tokyo Core CPI, Tokyo CPI as well as National CPI. And New Zealand will announce ANZ Business Confidence.