Daily Report: EUR/USD, GBP/USD, EUR/JPY And NZD/USD

The U.S. Dollar dropped to the lowest level since the start of 2013 after the Federal Reserve opted for maintaining the current level of asset purchases. However, it advanced slightly towards the end of last week when the President of the St. Louis Fed Bank, James Bullard, stated that the central bank may make a “small” cut in asset purchases some time over the coming month. The Dollar Index which gauges the performance of the currency against a group of 10 major monetary units dipped 1 percent, which was the lowest since February. On the data front, the Philadelphia region revealed that Manufacturing activity increased in September at the quickest rate since March of 2011, posting at 22.3 after a reading of 9.3 in August. In addition, claims for Unemployment Benefits jumped by 15,000 to 309,000 and Existing Home Sales rose from 5.39 million to 5.48 million in August. Gold prices declined the most in almost three months as policy maker Bullard indicated that the much-anticipated reduction in stimulus may happen in October. Futures for end-of-year deliveries slipped 2.7 percent and traded at $1,332.50 on the New York Mercantile Exchange.

The Euro gained as much as 200 pips as the Federal Reserve revealed its decision on stimulus, and it traded to the upside on metrics which confirmed that the E.U. has come out of its record-long recession. Investors will shift their focus to the results of the German elections over the coming week. Analysts have predicted that a loss for Chancellor Angela Merkel may prompt the 17-nation currency to depreciate. The British Pound gained further, though its advance was limited despite economic publications showing that the U.K.’s budget deficit contracted.

The Yen dipped slightly against the U.S. Dollar as market speculators kept a close eye on Prime Minister Shinzo Abe who has been working on his “three arrow” growth plan. The Premier has given the green light for an increase in sales taxes and is still debating whether to reduce corporate taxes. The nation’s Finance Minister, Taro Aso, together with a panel of tax experts, have indicated that cutting corporate taxes may affect fiscal stability.

And lastly, in the South Pacific, the Australian Dollar dipped between Friday and Saturday on speculation that the Reserve Bank may intervene in order to debase the currency. The Kiwi retreated from four-month highs after it became apparent the Federal Reserve may still go ahead with a reduction in the monthly asset buying, and as better than estimated data on manufacturing out of the Philadelphia area stopped the greenback’ s decline.

EUR/USD- Confidence Up Despite Unemployment
Data out of the Euro monetary bloc revealed that consumer confidence was higher, though consumers are still jittery about record-high levels of unemployment. Speculators are also waiting for the German election results as German Chancellor Angela Merkel seeks re-election. The Euro gained versus the greenback but slumped slightly as Americans worry about the upcoming debate which will decide whether the government stays open or shuts down at the start of October. Official data revealed that Consumer Confidence in the E.U. went to -14.9.

GBP/USD- Sterling Snaps Gains
Subsequent to a major hike, the Sterling declined against the U.S. Dollar. The drop was the result of comments by one of the Federal Reserve’s policy makers who suggested on Friday that the central bank has not discounted the idea of reducing stimulus in October, especially as the vote not to do so in September was rather close. The British Pound dipped slightly on Thursday after economic figures confirmed a fall in U.K. Retail Sales. According to the numbers, Sales slipped 0.9 percent last month. But Friday’s metrics were positive and denoted that the country’s Public Deficit contracted from 14.41 to 13.16 billion Pounds.

EUR/JPY- Euro Traded Above Average
The Euro gained versus the Yen as demand for high risk assets went up. The Euro region announced new changes in the way it measures the “structural deficits” for the region’s member nations, and suggested it will have positive results for the most troubled countries such as Spain. The Yen slumped against the Euro as the latter advanced versus the greenback on the FOMC’s report. Meanwhile, in Japan, the Governor of the central bank, Haruhiko Kuroda, stated that the economy has made moderate strides in the right direction, though he confirmed that policy makers are ready to act if need be. On the data front, Japan’s Adjusted Trade Deficit contracted as exports went up 14.7 percent YoY. The Euro rose on market sentiment, while the economic calendar remained light over the past few days.

NZD/USD- Healthy Outlook Helped Kiwi
New Zealand’s Dollar retreated from prior highs against the U.S. currency as investors now believe the Fed may buy fewer bonds in October. In the meantime, domestic news revealed that the economy expanded by 0.2 percent from April to June just as economists had anticipated. The Gross Domestic Product grew 2.5 percent on a year over year basis. Today, China will publish the HSBC Manufacturing Index, an important indicator that could impact the value of the South Pacific monetary units.

Today’s Outlook
Today’s economic calendar shows that the Euro region will report on Manufacturing and Services PMI. Japan’s markets are closed due to the Autumn Equinox Holiday. And the President of the European Central Bank is scheduled to deliver a speech.