Daily Report: EUR/USD, GBP/USD, USD/CHF And XAU/USD : July 10, 2013

The U.S. Dollar traded remarkably higher against the Euro and the British Pound after the International Monetary Fund issued its growth forecasts for the major global economies. According to the IMF, the U.S.’s economy may only expand 1.7, rather than the previously indicated 1.9 percent. And for 2014, the IMF believes the U.S. economy may only grow 2.7 percent instead of the 3 percent initially suggested in April. Despite the bearish outlook, demand for the greenback remained strong as investors believe the Federal Reserve may begin tapering off on stimulus, should the economy continue to show signs of improvement. Today, all eyes will shift to the Federal Reserve Chairman, Ben Bernanke, who’s scheduled to deliver a speech on monetary policy. Risk appetite ebbed in the market as the International Monetary Fund added that the emerging markets won’t see as much growth while global growth may only amount to 3.8 percent, rather than the 4 percent previously projected. In its report, the Fund recommended that the U.S. augment its debt ceiling while Europe needs to do whatever is required to prevent “financial fragmentation.” Gold Prices rallied for a second consecutive day as China reported increases in Inflation, which fueled appeal for the precious metal as a hedge, and as demand for gold jewelry rose. According to the Bureau of Statistics, the Chinese Consumer Price Index climbed 2.7 percent from the previous year.

The Euro fell to three-month lows against the U.S. currency after an official from the region’s central bank suggested that policy makers plan to adhere to “accommodative policies” for at least one year. The shared monetary unit slumped against the majority of its counterparts after Reuters reported that Executive Board Member of the ECB, Joerg Asmussen, suggested the bank was considering leaving the key cash rate unchanged. The British Pound also traded lower against the greenback subsequent to lackluster economic releases which cast doubts on the improvement of the nation’s economy. According to official figures, Factory Output declined, Industrial Production stagnated, and the Trade Deficit expanded. The Sterling remained under pressure despite positive figures which revealed that Home Prices climbed to the highest since the beginning of 2010, and Retail Sales increased.

The Yen dipped to six-week lows against the greenback as the American currency continued to enjoy high demand amid speculation the Federal Reserve may start scaling back on the monthly asset purchases. The Japanese currency remained weak despite news indicating that four major companies applied for permits to re-start ten nuclear reactors in an effort to reduce the nation’s dependence on energy imports. The Yen continued to trade to the downside despite positive reports which showed that the country posted a Current Account surplus for a fourth month in a row in May. The Surplus stood 58.1 percent higher than the previous year as it rose 100.8 percent in the month of April.

Lastly, in the South Pacific, Australia’s Dollar rallied for a second consecutive day versus the greenback on concerns that speculation against the currency as excessive. The Aussie erased some of its gains after Asian stocks surged subsequent to the release of Chinese Inflation data, and as domestic news indicated that Business Conditions fell to the lowest since May of 2009. The New Zealand Dollar advanced versus its U.S. peer as figures revealed that Business Confidence improved, reaching the highest level in close to four years.

EUR/USD- Euro Drops On IMF Forecasts
The Euro slumped to three-month lows against the greenback after the International Monetary Fund reduced its global growth forecast for this and next year. The IMF indicated that the Euro region’s economy may shrink by 0.6 percent rather than the 0.4 percent previously anticipated. The shared currency remained under pressure as the European Central Bank signaled it may leave the benchmark interest rates at the current low. Today, investors will pay close attention to data out of Italy and France relating to Industrial Production.
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GBP/USD-Sterling Hits 3-Year Low
The British Pound traded at a three-year low versus the greenback after economic reports showed that Factory Output fell 0.8 percent from April when it posted a 0.2 percent decline. Manufacturing Production dipped at an annual rate of 2.9 percent in the month of May, while economists predicted it would only sustain a 1.6 percent fall. The Office for National Statistics indicated that Industrial Production stagnated in May, while analysts had predicted it would rise 0.2 percent. Other releases revealed that the country’s Trade Deficit expanded from GBP8.43 billion in April to GBP8.49 billion in May. On the positive side, the Housing Price Index rallied 21 percent last month; and Retail Sales, climbed at annual 1.4 percent in the same month.
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USD/CHF-Retail Sales Climb
The Swiss Franc traded close to 1 ½ month lows versus the U.S. Dollar amid speculation the Federal Reserve may begin to cut back on stimulus. On the data front, reports out of Switzerland showed that Retail Sales rose at an annual pace of 1.8 percent in May, which is much lower than the increase of 3 percent in April. The Franc remained under pressure after reports indicated that the region’s governments gave the green light for Greece to obtain its next tranche of aid. This reduced demand for refuge, and therefore affected the Swissie.
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XAU/USD-Gold Rallies On Chinese Data
Gold Prices increased after China’s Inflation reports exceeded forecasts, and bolstered the appeal of the precious metal as a hedge to the increasing consumer prices. China indicated that the Consumer Price Index advanced 2.7 percent last month. Gold Futures for August delivery settled at $1,243.55 a troy ounce on the Comex Division of the New York Mercantile Exchange. Gold remained strong on speculation the metal may be oversold as economic data out of the U.S. has bolstered the greenback’s value.
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Today’s Outlook
Today’s economic calendar shows that Japan will report on Household Confidence, Core Machinery Orders and Foreign Bonds Purchasing. The Euro region will issue data on German CPI. The U.S. will release the FOMC Meeting Minutes. Australia will publish the Unemployment Rate and Employment Changes. Japan may announce its Interest Rate Decision, but this is not certain.