Daily Report: EUR/USD, GBP/USD, NZD/USD And XAU/USD : July 17, 2013

The U.S. Dollar remained weak against most of the majors as investors await the Federal Reserve Chairman, Ben Bernanke, who is set to testify before Congress on the state of the economy. Analysts believe his tone will denote caution as he knows that lawmakers want to be certain any decisions made by policy makers won’t cause the U.S. economy to spiral out of control. And although yesterday’s metrics were positive, they weren’t convincing enough to anticipate stimulus cuts just yet. The economic reports indicated that manufacturing activity has improved, especially as Industrial Production posted gains of 0.3 percent last month after having posted at 0 percent in May. The Labor Department added that Year over Year, prices went up at an annualized pace of 1.8 percent. The releases also showed that inflation pressures are rising; Consumer Prices increased 0.5 percent in June while the Core CPI, which does not include the costs of volatile items like energy and food, remained steady at 0.2 percent, mostly due to a hike in gasoline prices at the pump. Gold Prices held on to their previous gains after the U.S. released CPI data revealing that Consumer Prices climbed more than forecast in June.

The Euro erased some of its gains against the greenback following the announcement of better than predicted inflation figures out of the U.S.; however, the Euro traded higher versus its U.S. peer ahead of the testimony to be delivered by Fed Chairman Bernanke. The 17-nation currency rose despite lackluster news which showed that Investor Confidence for the region’s biggest economy deteriorated this month. Separate announcements confirmed that E.U. Exports fell in June, causing the Euro-zone’s Trade Surplus to contract. The British Pound traded lower against the greenback subsequent to the publication of U.S. Consumer Prices. U.K. data also confirmed that CPI increased, reaching the highest level since 2012, which contributed to the currency’s drop. But the currency’s losses were limited as the Office for National Statistics stated that the House Price Index climbed in May to a new record high. Today, the Bank of England will publish the minutes from the recent Monetary Policy Meeting. Market investors are anxiously waiting to see if the newly appointed Governor, Mark Carney, voted in favor of expanding the current asset purchasing program or not.

The Yen traded mixed versus the greenback in anticipation of testimony to be delivered before U.S. Congress by the Federal Reserve Chairman. Many investors closed their long Dollar positions on speculation the central bank may consider cutting stimulus soon, thereby bolstering the Yen.

Lastly, in the South Pacific, the Reserve Bank of Australia issued the minutes from its most recent Monetary Policy meeting, which indicated that the country’s Inflation prospects were impacted by the currency’s quick decline, leaving room for further easing. The Aussie Dollar rallied versus all of its counterparts on speculation the central bank may lower the key cash rate. New Zealand’s Dollar rose for a second consecutive day versus its U.S. counterpart on speculation the greenback will advance further before Fed Chairman Bernanke testifies on Capitol Hill.

EUR/USD-ZEW Disappoints
The Euro rose against the U.S. Dollar despite disappointing ZEW data out of Germany and it remained high given the greenback’s broad weakness brought on by the release of Consumer Prices in the U.S. According to the ZEW Index, which measures economic confidence amidst investors, sentiment plunged from 39.6 to 36.3 this month. Other official releases confirmed that the Euro region’s Consumer Prices remained at a steady 1.6 percent in June, just as economists predicted. Separate news indicated that imports dropped 2.2 percent, and exports dipped 2.3 percent. These two factors contributed to a contraction of Trade Surplus from EUR15.2 billion in April to EUR14.6 billion in June. Meanwhile, the Euro remained under pressure as Portugal’s political turmoil continued to make headlines and in Spain, the Prime Minister faces new scandals.
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GBP/USD- CPI Rises
The Sterling pared losses against the greenback following better than forecast data on U.S. Consumer Prices, but market investors traded cautiously ahead of the Federal Reserve Chairman’s testimony before Congress. In the U.K. reports issued by the Office for National Statistics showed that Consumer Price Inflation increased by 2.9 percent from the previous year, in June. The figures were below the expected 3.0 percent hike. The ONS went on to explain that the rise in prices was mostly due to the higher fuel costs. Other releases in the U.K. indicated that Consumer Inflation dipped 0.2 percent; and Core CPI, which does not include energy or food costs, posted an increase to a seasonally adjusted 2.3 percent for last month. Lastly, the Retail Price Index went up to 3.3 percent, which was a tad lower than predicted.
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NZD/USD- CPI Higher In 2nd Quarter
New Zealand’s Dollar extended gains against the greenback as demand for the U.S. monetary unit declined before Fed Chairman Bernanke offers testimony on the state of the U.S. economy to Congress. In New Zealand, domestic reports indicated that Consumer Price Inflation climbed 0.2 percent during the months between April and June. The figures were much lower than the previously predicted rise of 0.3 percent.
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XAU/USD-Gold Rallies A Sixth Time
Gold prices rose for a sixth time within seven trading sessions as the weakness in the U.S. Dollar prompted speculators to seek other investments. The precious metal’s prices remained supported on speculation the Federal Reserve will forge ahead with the current level of stimulus, given recent soft data which suggested the U.S. economy may be losing momentum. Gold Futures for delivery in August climbed 0.6 percent and settled at $1,291.70 a troy ounce on the Comex Division of the New York Mercantile Exchange. Gold Futures are predicted to reach $1,297.20 as they did on July 11th.
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Today’s Outlook
Today’s economic calendar shows that in the U.K. the Bank of England will issue the MPC Meeting minutes. The U.K. will also announce Claimant Count Change and the Average Earnings Index+ Bonus. The U.S. will report on Building Permits, Housing Starts, and the Beige Book. Federal Reserve Chairman Bernanke will testify before Congress. Australia will release data on the CB lending Index. And China will publish Home Prices.