The dollar rallied close to a 6-month high on Tuesday versus the majority of its Forex counterparts as most experts predict that the economy may still gather momentum. They also believe that the Federal Reserve may be pleased with the recent string of employment data, enough to issue hawkish remarks with the policy statement. The dollar rose against the yen and traded at the highest rate in three weeks on reports indicating that the Treasury auctioned off $29 billion in two-year notes, which were sold at the highest yield in four years. On the data front, the U.S. Conference Board announced that Confidence among consumers surged to 90.9 this month, reaching the highest level in almost seven years. The index had printed at 86.4 in June. The consumers who were polled revealed that their optimism was mostly due to improvements in the employment market. Meanwhile, Gold, which has traded mixed in the past few days, reached the highest price in five days as the crisis in the Ukraine and the Middle East boosted the appeal of harbor assets. Sources say that the U.S. and the euro region's nations may not wait to impose further sanctions against Russia since reports showed that Vladimir Putin, the nation's President sough to place restrictions on agricultural shipments coming in from America and a number of its allies. The Prime Minister of Israel, Benjamin Netanyahu suggested that his country should be prepared for what could be an extended military campaign against Hamas. Futures for December delivery climbed 0.4 percent and traded at $1,310.80 a troy ounce on the New York Mercantile Exchange; and bullion for immediate delivery jumped 0.3 percent to $1,308.35 during the morning hours in London. Economists are predicting that the shiny commodity could continue to trend to the upside as risk aversion takes over sentiment in the currency exchange. This may happen now that the U.S. secured evidence and officially accused Russia of testing a missile, violating a nuclear missile treaty that dates back to the Cold War.
The euro remained near an eight-month low against the dollar as investors remained concerned over diverging policy between the Federal Reserve and the european Central Bank. They also remain concerned with the impact that the new sanctions against Moscow could have on the euro-zone's already fragile economy, and about the upcoming reports on consumer prices, which are expected to reveal whether the ECB's measures are helping stave deflationary pressures. The British pound had rallied on Monday, but traded steadily against the U.S. monetary unit on Tuesday as the greenback was supported by optimism that its economy will show growth for the past few months. In the U.K., Net Loans to individuals climbed, though less than expected.
The yen fell against its U.S. peer and the 18-nation currency as the market traders positioned themselves before the U.S. publishes key macroeconomic fundamentals, including Non-Farm Payrolls. The yen was also affected by lackluster Employment figures and a drop in Retail Sales for June.
The New Zealand dollar plummeted against the U.S. monetary unit as the nation's biggest dairy producer has shown a decline in prices, and farmers are expected to receive less money per kilogram of dried dairy products. Australia's dollar, on the other hand traded little changed after steadying against the greenback. The Aussie benefitted from stellar industry reports out of China, its main trade partner, and from local announcements confirming improvements in the housing market. According to the official numbers, New Home Sales jumped 1.2 percent last month, after coming in with a 4.3 percent fall in May.
EUR/USD Lacks Momentum
The EUR/USD fluctuated slightly while investors waited for the Federal Reserve's Open Market Committee to deliver the policy statement. Investors anticipate the central bank may reduce stimulus further, and offer comments that will give the markets clues on when they can expect a cash rate reduction. Meanwhile, with a lack of macroeconomic reports out of the E.U. the EUR/USD is responding to sentiment in the Forex and speculation that the euro monetary bloc could be negatively affected when it moves ahead with additional economic sanctions against Russia. Today could be an important day for the 18-nation currency as Spain is scheduled to release key economic metrics that may prompt the pair's movement.
GBP/USD Net Lending Posts Lower
The GBP/USD traded practically unchanged following soft economic releases out of the U.K., and dipped slightly as the markets treaded cautiously ahead of important fundamentals out of the U.S. Official British news indicated that Net Lending to Individuals surged by 2.5 billion pounds rather than the predicted 2.6 billion. Furthermore, Net Loans for May were modified to show an increase of 3.0 billion pounds rather than the previously published 2.7 billion pound hike. Other announcements confirmed that Mortgage Approvals posted at 67,196 in June, while they printed at 62,007 in May. The numbers surprised economists. Bank governor, Mark Carney, reiterated that a real estate bubble could undermine the economy's recovery, and for such reason, lending controls continue to be important tools. In other comments, the Deputy Governor of the Bank of England, Ben Broadbent intimated that the slack of the global economies could dampen the U.K.'s goals for achieving solid growth.
USD/JPY Data Disappoints Speculators
The USD/JPY declined after economic reports out of Japan denoted that Retail Sales fell 0.6 percent, while the level of Unemployment went to 3.5 percent. The drop in Retail Sales followed May's, when retailers reported a dip of 0.4 percent. And although the numbers were not as positive as anticipated, they were overshadowed by a rise in Consumer Spending and a Business Survey which reflected a more positive attitude, months after the government imposed the sales tax hike. Analysts have indicated that payroll creation is at the highest level in years, so the increase seen in the Jobless Rate could be the result of more employment seekers entering the labor market. Many analysts believe that the level of joblessness is a sign that the economy could show substantial recovery in the third quarter of the year, especially since unemployment stands at the lowest rate in sixteen years. However, the figures are not likely to reduce expectations for an increase in stimulus. The USD/JPY slipped somewhat later in the day as geopolitical tensions continued to impact risk appetite and as investors wondered whether the situations would drag on the economic recovery of nations around the globe.
NZD/USD Milk Prices Dip Further
The NZD/USD depreciated to the weakest since the beginning of June on the possibility that the country's dairy farmers will earn less in 2015. Experts explained that this change may have resulted from the currency's appreciation and the fall of dairy products. Fonterra Cooperative Group Ltd., which is known for being the biggest exporter of dairy announced that it is reducing the forecast for milk prices for the remainder of 2014 and 2015. The pair remained under pressure as economists predict that the U.S. may post stellar metrics on growth as well as on jobs' creation. The NZD/USD dipped 1.8 percent since last week, when the central bank's governor, Graeme Wheeler suggested that the Kiwi's value is "unjustified."
Disclaimer: Today's economic calendar reveals that the euro region will post Spain's GDP, Business Climate, Consumer confidence and Consumer Inflation Expectation. The U.S. will publish ADP Non-Farm Employment Change, GDP, Real Consumer Spending, the Interest Rate Decision, and the FOMC's Rate Statement. Australia will announce Building Approvals as well as the Import and Export Price Indexes.
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