Daily Report: EUR/USD, GBP/USD, USD/JPY And AUD/USD : July 12, 2013

The U.S. Dollar plunged to the lowest price in close to three weeks against the Euro as Federal Reserve Chairman, Ben Bernanke, stated that there was need to maintain the current monetary easing measures. He explained that the country’s unemployment remains too high and given the current rate of inflation, the economy needs help in order to improve. The greenback declined against the majority of its counterparts as the minutes from June’s Monetary Policy meeting were released, which revealed that policy makers were divided on when to begin reducing stimulus. However, the majority supported the idea of continuing with the current level of monthly asset purchases until the job’s sector shows signs of growth. The U.S. currency remained under pressure and continued to trade lower versus the Euro and the Yen following the announcement of Initial Jobless Claims. The Labor Department indicated that applications for unemployment benefits rose by 16,000 in the past week and posted a two-month high of 360,000. Gold Futures increased the most in 12 months following Mr. Bernanke’s comments in which he suggested the U.S. economy is still in recovery mode and “highly accommodative” measures need to remain in place. Gold bullion had fallen 23 percent in the months between April and June after the central bank’s chairman indicated that the Fed would consider cutting back on the monthly asset purchases. The precious metal’s prices surged as he hinted that tapering is not in the near future. Gold Futures for delivery in August settled at $1,284.70 a troy ounce on the Comex Division of the New York Mercantile Exchange at 9:30 am on Thursday.

The Euro eased after surging to the highest price in three weeks versus the greenback following the release of the FOMC’s minutes, which prompted the dollar’s quick decline. The foreign currency exchange reacted with extreme volatility to the remarks made by Chairman Bernanke as his comments suggested that reducing the level of stimulus was not a consideration at this time. Due to the volatility, the shared currency flirted with the $1.3200 level, but retreated soon thereafter as political uncertainty is still playing a major role in the Euro-zone while the fundamentals continue to denote economic weakness. The British Pound rallied for a second day in a row versus the U.S. Dollar after the Fed Chairman Bernanke reiterated that stimulus was necessary for growth. The British monetary unit rose against the Euro in the heels of the release of the Monetary Policy Meeting minutes by the Bank of England, which are expected to show how the members voted in regards to quantitative easing. As analysts indicated, the Sterling’s movements have been prompted by the greenback’s weakness, not necessarily as a result of strong economic metrics.

The Yen gained against the U.S. Dollar but economists predict the currency may fall 18 percent in the event that the Bank of Japan opts for increasing stimulus, which would cause investors to shift their holdings abroad. The Yen remained strong even as the central bank announced it plans to augment its monetary base to 70 trillion Yen per year on signs that suggest the country’s economy has improved. This also indicated that the BOJ may expand its monetary easing program to reach the inflation target of 2 percent.

And in the South Pacific, positive economic data together with the release of the FOMC minutes prompted the Australian Dollar to advance for the third time in close to one week. In Australia, reports revealed that employers added more payrolls than forecast. However, the Unemployment rate increased to the highest in close to four years. The New Zealand Dollar reached a three-week high after releases confirmed that activity in the Manufacturing sector expanded last month.

EUR/USD-Draghi’s Time Line
The Euro continued to rally versus the U.S. Dollar a day after the Federal Reserve indicated it plans to adhere to the current level of stimulus for at least until the end of 2013. Meanwhile, in the E.U. the European Central Bank announced in its bulletin that it will keep the costs of borrowing money low for an “extended period of time.” The announcement prompted much talk amidst investors who wondered what Mr. Draghi meant when he spoke to the press and indicated that the European Central Bank will leave interest rates unchanged for “some time.” Analysts believe that for Mr. Draghi, the phrase “some time” is really more than one year. Today, the Euro region will issue data on Industrial Production.
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GBP/USD-BOE Offers Clues
The British Pound extended gains versus the greenback after the U.S. released rather disappointing economic reports which showed that Initial Unemployment Benefits Applications rose by 16,000, reaching a seasonally adjusted 360,000 while economists predicted that these would decline by 4,000. Meanwhile, in the U.K. the Bank of England’s policy makers intimated that the bank may consider leaving the key cash rate unchanged given the recent reports which still denoted the country’s economic weakness.
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USD/JPY-Dollar Rebounds
Despite its sudden plunge after the Federal Reserve issued statements regarding the future of U.S. monetary policy, the greenback erased some of its losses against the Yen. However, the Yen regained its footing and rose against the U.S. currency after the Bank of Japan stated it will refrain from making changes to monetary policy for now. Furthermore, the central bank upgraded its outlook for the economy, and indicated that the country is showing signs of improvement. The bank reiterated its original plan to raise the monetary base by $609 billion USD, but suggested it may consider expanding stimulus later on.
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AUD/USD-Aussie Unemployment Climbs
Australia’s Dollar advanced versus its U.S. counterpart following a release which showed that Aussies hired 10,300 more individuals in June, while economists predicted the employment sector would lose 2,500 payrolls. However, the report also confirmed that the Australian Unemployment rate went up to 5.7 percent, the highest since the month of September of 2009. This increased speculations the Reserve Bank may lower the benchmark interest rate when it meets on August 6.
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Today’s Outlook
Today’s economic calendar shows that Japan will release data on Capacity Utilization, Industrial Production and the BOJ’s Monthly report. The Euro region will issue metrics on Industrial Production. The U.S. will announce PPI and Core PPI.