Daily Report: EUR/USD, GBP/USD, EUR/JPY And NZD/USD : September 19, 2013

The U.S. Dollar traded mixed against the majors and at one point reached close to five-week lows while investors awaited the Federal Reserve to issue the highly expected announcement regarding stimuli. The markets failed to react to announcements by the Commerce Department revealing that U.S. Housing Starts only went up 0.9 percent to 891,000 units in August; the numbers were revised to the downside in July to 883,000 units. The release also indicated that Building Permits slipped 3.8 percent, down to 918,000 units last month, while analysts said they would only dip by 0.4 percent. Once the FOMC published its statement it was clear that policy makers decided not to reduce asset purchases at this time and have left the interest rate at 0.25 percent. Mr. Bernanke’s comments were optimistic as he suggested the economy has indeed improved, though it was still facing “headwinds” which contributed to the central bank’s decision. The news came as a big surprise to a vast majority of market investors who expected the Fed to cut back on the $85 billion of monthly bond purchases. Mr. Bernanke’s words prompted the further decline of the greenback, causing it to inch near a three-month low. The FOMC intimated that it will wait to see if the economy shows steady progress before considering a reduction in stimuli. In the meantime, Gold prices went up and down as traders bought and sold the precious metal on speculations the Federal Reserve would trim the asset purchases. Gold Futures slipped as far as below $1,300 a troy ounce before the big news. But as it became apparent that the Fed refrained from altering the stimulus measures, Gold recouped, surging the most in two months. Futures for immediate delivery jumped 2.3 percent and hit $1,341.03 on the Comex Division.

The Euro climbed against the greenback subsequent to the much-awaited announcement by Fed Chairman Ben Bernanke. It had traded steadily in the early part of the day as investors sought safe haven currencies in the heels of the announcement. Now the focus will shift to today, when the U.S. will issue employment data as well as metrics on Existing Home Sales and Manufacturing. The British Pound advanced to eight-month highs after the Minutes from the last Monetary Policy meeting were issued by the Bank of England. The currency attempted to breach the $1.60 psychological level soon after the report revealed that the panel agreed to leave the quantitative program at the current level on signs the U.K.’s economy has stayed on course towards total improvement.

The Yen traded higher against the U.S. Dollar as the Japanese cabinet grappled with a number of issues including whether to implement a corporate tax cut to offset the impact that the hike in sales tax will have. Finance Minister Taro Aso suggested that a reduction in corporate taxes is a “difficult task.”

Lastly, the South Pacific currencies were down against their U.S. counterpart as the markets waited for the Federal Reserve to announce their next step. New Zealand’s monetary unit came under pressure as data showed that the Trade Deficit widened, although less than previously expected.

EUR/USD- Euro Trades Close To Flat
There wasn’t much volatility and therefore, the Euro traded almost flat throughout the day until the Federal Reserve announced it will adhere to the current stimulus measures. The 17-nation currency was slightly lower as speculators opted for harbor currencies and dipped briefly to the downside as the markets were nervous ahead of the big FOMC statement. There was no economic news out of the E.U. but the optimistic sentiment continues to reign in the region since the ECB’s President, Mario Draghi, indicated that the outlook for growth was positive, and Germany issued stellar reports denoting the highest level of investor confidence since 2010.

GBP/USD- BOE Issued MP Minutes
The Sterling reached new levels, and touched 8-month highs against the greenback upon the publication of the BOE’s policy meeting Minutes. These revealed a consensus between policy makers as well as a vote of 9-0 to keep quantitative easing at GBP375 billion and the costs of borrowing money at 0.5 percent. The panel was headed by the governor, Mark Carney, who in previous weeks indicated his intentions to keep the key cash rate at record lows until the level of unemployment declines to 7 percent. The bank’s Minutes indicated that the economy has recovered.

EUR/JPY- Global Sentiment Aids Euro
The Euro traded slightly higher against the Yen as the greenback weakened following a surprising announcement by the Federal Reserve. Mr. Bernanke indicated there would be no changes at this time, words that took investors by surprise. In Japan, it’s expected that Prime Minister Shinzo Abe will issue his decision on whether he’ll implement stage one of the new plan which includes a hike in sales tax. Meanwhile, Fiscal Policy Minister, Akira Amari suggested that corporate taxes ought to be reduced, an issue that has kept cabinet members at odds. There were no economic releases out of the Euro region, but the shared currency remained supported by positive metrics issued on Tuesday which showed that Investor Sentiment in Germany climbed 7.6 points in September, which was the most in 3 years.

NZD/USD- Trade Deficit Widens
New Zealand’s Dollar slipped against its U.S. peer, though it continued to trade close to 12-week highs, after official data revealed an expansion in the Trade Deficit. The numbers were disappointing, although they posted better than forecast. According to sources, the Trade Deficit dropped to 1.25 billion NZD in the second quarter, while it had been at 0.66 billion NZD. The Kiwi managed to erase some of its losses prior to a release which confirmed that dairy products went up in price, though the volume of sales fell from record levels in August. The Kiwi tumbled in tandem with the Australian currency as investors waited for the FOMC statement.

Today’s Outlook
Today’s economic calendar shows that Switzerland will report on the Trade Balance. The U.K. will issue data on Retail Sales and Core Retail Sales. The U.S. will announce the latest metrics for Initial and Continuing Jobless Claims, as well as Current Account, the Philadelphia Fed Manufacturing Index and Existing Home Sales.