The U.S. Dollar gained against most of the majors and extended its advance versus the Euro as domestic releases confirmed that Consumer Prices climbed more than anticipated in March, easing investor concern that the levels were too low. Official announcements by the Labor Department revealed that U.S. Consumer Prices jumped 1.5 percent from the prior year. The Consumer Price Index rose 0.2 percent in March, instead of the expected 0.1 percent. These numbers followed solid Retail Sales reports which denoted an advance of 1.1 percent, up from the predicted 0.9 percent. The greenback continued to trade to the upside despite metrics out of the New York Fed Bank which divulged that Manufacturing went down to 1.29 in April after coming in at 5.61 in March. Gold Prices retreated from a three-week high as the recent macroeconomic fundamentals out of the U.S. suggested that its economy is strengthening. But with the crisis mounting between Russia and the Ukraine, the markets anticipate that the shiny metal could appreciate.
The Euro plummeted after Germany, the region’s largest economy, announced that the Index of Investor and Analyst Expectations dropped. The Euro weakened against most of its peers after President of the European Central Bank, Mario Draghi, stated that the currency’s recent appreciation may lead policy makers to boost stimulus. However, traders say that Mr. Draghi’s rhetoric appears to be nothing but talk. The Euro shrugged off recent statements and rose, even as options traders have been the most dovish on the shared currency since 2009. The British Pound erased previous day losses against the greenback on reports revealing that Inflation climbed in the U.K. Its gains were limited as the markets are keeping a close eye on the crisis between Moscow and Kiev. Leaders from the two countries will meet with U.S. and European officials in Geneva to try and iron out differences.
The Yen slipped against the U.S. Dollar as better than anticipated Retail Sales reports out on Monday supported the greenback. The announcement suggested that the economy is back on track after enduring a severe winter that affected growth. The greenback began to trade sideways following the release of better than forecast Inflation data, while speculators await Japanese metrics on Industrial Production, and a speech from the BOJ’s governor.
Lastly, Australia’s Reserve Bank released the minutes from the March policy meeting. These showed that policy makers want to maintain the status quo for some time in an effort to balance the economy. The publication of the minutes caused the Aussie Dollar to decline against the majority of its Forex counterparts.
EUR/USD - Spain Feels The Pressure
The EUR/USD dropped on Tuesday, as the ZEW Index which measures Germany’s Economic Sentiment posted a decline to 43.2 in April, which was the lowest in eight months. The index came in at 46.6 in March, and economists had hoped the numbers would not dip lower than 45.0. Traders navigated the markets with caution as the U.S. and the Euro-zone discussed more sanctions on Russia. But investors remain hopeful that the situation will ease when leaders meet on Thursday in Geneva. And according to sources, Spain’s Prime Minister, Mariano Rajoy, is expecting Mario Draghi, the President of the European Central Bank, to help prevent the currency from increasing further. Its recent hike prompted monetary authorities to consider additional easing measures. The Euro’s surge caused Spain’s consumer prices to decline enough to bring about a further drop in economic growth. Mr. Rajoy stated that the appreciation of the Euro is threatening the country’s exports which contribute to the nation’s recovery.
GBP/USD - Inflation Helps Sterling
The GBP/USD gained, trimming losses from the prior day, as the U.K. reported that Consumer Price Inflation went up 0.2 percent in March, meeting economists’ forecasts following a hike of 0.5 percent in February. The release also indicated that on a yearly basis, Prices rallied 1.6 percent after rising 1.7 percent in February. The GBP/USD did not continue its rally as sentiment supported the greenback subsequent to the announcement of U.S. data confirming that Consumer Price Inflation climbed 0.2 percent; and it was weighed down by risk aversion brought on by geopolitical tensions and the likelihood that Russia will face more sanctions.
XAU/USD - Gold Falls From 3-Week High
Gold prices fell after reaching the highest level in three weeks as investors reassessed their outlook on the U.S. economy and surmised that it was showing signs of strength. Gold Futures rallied on Monday as the tensions between Russia and the Ukraine intensified when Ukrainian military forces commenced “anti-terrorist” exercises in the Eastern portion of the country where Russian supported took over a number of government buildings. Talk of a possible Civil War ebbed risk appetite in the markets. However, Futures dropped on Tuesday as signs that the American economy is showing some signs of recovery dampened demand for the precious metal. Contracts for June Delivery traded at $1,304.80 a troy ounce on the New York Mercantile Exchange. The commodity has depreciated 1.9 percent since March 24.
USD/JPY - Dollar Trades Flat
The USD/JPY inched higher before trading flat, even as better than forecast U.S. Consumer Inflation data was released. According to official releases, Consumer Prices increased 0.2 percent over the past month. But the USD/JPY gains were capped by lackluster numbers showing that the Empire State Manufacturing Index was down 1.3 percent; economists had anticipated a higher number. The pair recovered as the global stock markets erased losses, prompting speculators to shy away from safe havens like the Yen.
Today’s Outlook
Today’s economic calendar shows that Japan will report on Industrial Production. The Euro region will issue Core CPI, CPI and Current Account. The U.K. will publish Claimant Count Change and the Unemployment Rate. The U.S. will announce Building Permits, Housing Starts and the Beige Book. Australia will provide data on NAB Quarterly Business Confidence. Furthermore, Federal Reserve Chairwoman Janet Yellen is expected to speak on the economy.