Daily Report: EUR/USD, GBP/USD, EUR/JPY And AUD/USD : October 21, 2013

The U.S. Dollar remained weak and traded at the lowest price in close to nine months as risk aversion declined in the markets on speculation that the central bank will delay its plans to cut back on stimulus after the U.S. Congress pushed through a deal at the last minute, thereby averting a default. In the days to come, the U.S. will release a vast number of reports ranging from Housing to Non-Farm Payrolls. In the meantime, Gold Futures retreated from five-day highs as a surge in equities around the globe dampened demand for the shiny metal. The rally in stocks came about after China announced the expansion of its Gross Domestic Product for the third quarter, and as the markets relaxed as President Barack Obama signed a Bill to raise the debt limit into law. Futures for December delivery slipped 0.6 percent and settled at $1,314.60 a troy ounce on the New York Mercantile Exchange. According to analysts, this means that gold has plunged 22 percent in 2013, and it’s headed for the first annual drop in 13 years.

The Euro gained versus the U.S. Dollar on speculation that the Federal Reserve won’t begin to scale back on stimulus until next year. The shared currency traded above the $1.3700 price but slipped against the Yen. The British Pound advanced versus the greenback as well and received a boost after data out of the U.K. confirmed an increase in Retail Sales, a factor that reaffirmed the belief that the British economy has not lost its momentum. The Sterling was also bolstered by speculation that the Federal Reserve will continue buying $85 billion in bonds per month in an effort to assert pressure on the long-term loan rates and stimulate further growth.

The Yen sustained a dramatic increase against the U.S. Dollar as Congress produced a solution that prompted the reopening of the government and prevented the U.S. from defaulting. On Friday, Japan’s Finance Minister, Taro Aso, complimented the U.S. for its efforts to avert the default, while the Bank of Japan’s Deputy Governor, Kikuo Iwata, suggested that the global economy as a whole has weakened more than anticipated, and therefore the bank plans to take additional steps in its aim at reaching the 2 percent inflation target.

Lastly, the South Pacific currencies strengthened versus their U.S. counterpart amid uncertainty over what the future holds for U.S. monetary policy.

EUR/USD- Euro Stronger After U.S. News
Once the U.S. announced it had a deal in place, which would be signed by President Barack Obama into law, the markets showed an increase in risk appetite. This shift in sentiment bolstered the Euro against the U.S. Dollar despite the lack of economic calendar releases out of the E.U. The 17-nation currency advanced after a massive dollar sell-off, and as investors look ahead to this week’s reports which will include the U.S. Non-Farm Payrolls, Durable Goods Orders and Housing. Economists anticipate that it could be a big week for the Forex exchange given that outside of the delayed releases, the markets will continue to speculate on what the Federal Reserve plans to do next.

GBP/USD- Retail Data Impressive
The British Pound extended gains against the U.S. Dollar as the U.K.’s Retail Sales numbers posted better than expected, while the markets remained influenced by the positive news out of the U.S. However, analysts are uncertain as to how the Sterling will fare in the days to come when reports on CPI and Employment are issued. The announcements are anticipated to raise speculation on what the Bank of England will decide about long-term policy. Members of the central bank believe that the rate of unemployment may not show improvement until 2016. Meanwhile, economists say that consumer price inflation will probably stay at the same level, while housing price inflation may be affected by a hike in the price of oil.

EUR/JPY- Abe Loses Support
The Euro gained briefly against the Yen as the U.S. announced the completion of an agreement on spending and the debt limit. The shared currency remained supported as surveys indicated that Prime Minister Shinzo Abe has lost the support of a large percentage of people who believe that his measures have done very little to improve the economy. According to official statistics, 76.4 percent say they haven’t seen any recovery since Mr. Abe took office at the end of last year. The report also indicated that most individuals have not felt improvement in their daily lives after “Abenomics” were put into action. The Euro slumped slightly against the Yen throughout the weekend.

AUD/USD- RBA’s Minutes Bolster Aussie
The Australian Dollar gained versus the U.S. currency as the minutes from the October policy meeting were released, which suggested that the bank’s easing bias remains unchanged. The Board issued a statement to the press indicating that the members were in agreement to neither ” close off ” to the likelihood of cutting the rates, nor show intention to lower them. The Aussie also benefitted from Chinese data which showed growth in its economy as well as in the industrial output sector.

Today’s Outlook
Today’s economic calendar shows that the U.S. will report on Existing Home Sales. China will issue House Prices. The Euro region will publish data on Italian Industrial Production and German PPI. Japan will release the All Industries Activity Index.