The U.S. Dollar remained high against the majority of its trading counterparts a day after economic reports revealed that Factory production improved, adding to evidence the U.S. economy is still going strong. However, several majors saw heavy fluctuations on reports out of the Ukraine denoting that Russian President Vladimir Putin and his Ukrainian counterpart, Petro Poroshenko, were in the midst of negotiations to put an end to the conflict. Sources indicated that an agreement was reached, and that a cease-fire in the eastern Ukraine would go into effect. Russia denied such, arguing that it has not been part of the crisis. However, geopolitics was not the only factor impacting the currencies' movements. Investors are anxiously awaiting to hear what the European Central Bank decides regarding stimulus, and what the U.S. reports on Employment come Friday.
Gold Prices moved to the upside, although they stayed close to the lowest level in three months given the latest economic data out of the U.S. which has suggested the Federal Reserve could raise the borrowing costs sooner than planned. Futures for December delivery traded at $1,268.40 a troy ounce during the European market hours, on the Comex, denoting a 0.27 percent hike. The shiny metal has jumped up and down, between $1,265.30 and $1,270.40.
The Euro regained its footing and managed to rally against the greenback following reports indicating that the Ukraine and Russia had reached a cease-fire. However, its advance was limited as the markets await the European Central Bank's policy meeting decision regarding further stimulus. The Euro was also weighed down by lackluster Services PMI releases out of several nations including Italy, France and Germany.
Other economic announcements revealed a drop in Retail Sales and in the region's Services Purchasing Manager's Index. With news of a possible cease-fire, investors were set at ease, as they believed that the Euro-zone was carrying the burden of the sanctions imposed against Russia. The announcement prompted European equities to rally, and safe harbor German Bunds to decline. According to analysts, failure by the central bank to take some type of action this week could represent trouble for the E.U. as the region continues to see falling prices. The British Pound rebounded after hitting the lowest value in five months versus the U.S. Dollar. A day after the U.K. reported a hike in Construction activities, it announced that Services PMI rose in August, beating forecasts for a decline. The Sterling had sustained a dramatic drop on Tuesday, when a number of surveys revealed growing support for Scotland to gain its independence, a matter that will be decided with a referendum this month.
In Japan, sources say that Prime Minister Shinzo Abe is happy with the new cabinet. As most everyone in the foreign exchange anticipated, Mr. Abe named Yasuhisa Shiozaki as Health Minister. He will now be in charge of running the government's Pension Investment Fund, the largest in the world. It's been said that Mr. Shiozaki will institute several changes including a shift in asset allocation, and will form the Fund with riskier assets. This is predicted to push the Yen further to the downside.
And the Australian Dollar benefitted from positive news out of the country denoting that the economy expanded in the second quarter of this year. But the New Zealand Dollar plunged close to a six-month low as strong metrics out of the U.S. led to increases in Dollar buying.
EUR/USD-Traders Await ECB Decision
The EUR/USD went up, but its advance was kept in check by lackluster economic fundamentals out of the region and several of its nations. For starters, Retail Sales plummeted by 0.4 percent in July, just as predicted. Other metrics confirmed that he Services PMI missed expectations and followed the less than stellar Manufacturing PMI issued earlier in the week. While Italy showed a contraction in the services sector, and Germany and France saw the PMI slow down, Spain's surpassed forecasts. The official news showed that the region's Services Purchasing Manager's Index ticked down to 53.1 after coming in at 53.5 in July. Germany's Services PMI posted at 54.9, a month after the reading was 56.4. And France's went from 51.5 to 50.3. Analysts are concerned as Germany, the region's largest economy has not impressed with its economic reports. In previous days, German announcements pointed to the first drop in Gross Domestic Product since the start of the year. This week, investors will keep an eye on the release of Factory Orders reports. Following three consecutive declines, speculators predict the numbers may show an increase for August.
GBP/USD- U.K. Continues To Offer Solid Data
The GBP/USD bounced back after trading at a five-month low subsequent to macroeconomic releases divulging that the British Services sector grew at the fastest pace since November of 2013, providing support for the pair. According to Markit, the Services Purchasing Manager's Index climbed to 60.5 in August. This reading followed July's which posted at 59.1. The numbers surprised economists who anticipated a decline to 58.5. In the meantime, polls conducted throughout the last few days have shown that 42 percent of the Scottish population favors gaining independence from the U.K., while 48 percent say they oppose it. The data showed that support for independence has gained momentum, as the numbers were lower in the past months.
AUD/USD- Aussie Economy Grew
The AUD/USD advanced following stellar reports out of the South Pacific nation indicating that the economy grew in the second quarter of this year. The official release by the Bureau of Statistics revealed that the economy expanded by 0.5 percent. Ahead of the economists' predictions. The annual Gross Domestic Product showed growth of 3.1 percent over the year until June, also ahead of the anticipated numbers. Analysts say that a slowdown of the Aussie economy may take place especially since the Reserve Bank opted for leaving the costs of borrowing money unchanged at 2.5 percent, and stated that monetary policy needs to stay accommodative for the months to come. The experts also anticipate that iron prices could continue to drop due to a decline in demand from China. Such a fall in prices would weigh heavy on the mid-tier miners.
EUR/JPY- Euro Trades Higher
The EUR/JPY traded higher on Wednesday even though the Euro weakened against several of its counterparts as the market traders await the European Central Bank's policy decision. On the data front, Japan reported that the average salaries, including bonuses climbed 2.6 percent in July, denoting that there was a hike of over 2 percent for the first time in ten years. The Labor Minister stated that non-regular payments went up an impressive 7.1 percent. The decline of the Yen represents renewed hopes as the Government's Pension Fund will undergo a change in its portfolio and therefore benefit the population. Sources believe that the changes which will comprise the addition of riskier assets like stocks and bonds will produce a higher demand for foreign currencies.
Today's Outlook
Today's economic calendar shows that the Euro region will issue the Interest Rate Decision, the ECB will hold a Press Conference, and the E.U. will release Retail PMI. The U.K. will report on the Interest Rate Decision and the BOE's QE Total. The U.S. will provide the Initial and Jobless Claims, Trade Balance, Non-Farm Productivity, and ISM Non-Manufacturing PMI. Furthermore, several FOMC members are expected to deliver speeches.