Daily Report: EUR/USD, GBP/USD, USD/JPY And AUD/USD : September 04, 2013

The U.S. Dollar reached a six-week high against the Euro ahead of economic releases which analysts believe will show that U.S. Factory Output rose, providing further evidence for the Federal Reserve to begin reducing stimulus. The Institute for Supply Management confirmed that its Index reached 55.7 in August after posting at 55.4 the prior month. The greenback declined against a number of its forex peers a day after several major economies announced improvements in their manufacturing sectors. On Monday, China indicated that manufacturing activity rose for the first time in 12 months and the U.K. stated that manufacturing surged to a 30-month high. The U.S. currency retreated briefly after Russia’s news agency reported a missile launch in the Central Mediterranean Sea. Later on, the Israeli government confirmed it had engaged in a joint rocket launch test with the United States. Gold Futures declined during the Euro-zone’s trading hours subsequent to the announcement of solid metrics suggesting that several global economies were showing signs of recovery. Gold Futures for delivery in December slipped 0.4 percent on the New York Mercantile Exchange, reaching $1,390.60. Prices for the precious metal rallied to $1,433.50 on August 28, when investors sought safe havens on speculation that the U.S. was close to launching a military attack on Syria.

The Euro weakened against the greenback as market investors wait for the European Central Bank to issue its rate statement, and for the U.S. to provide data on Non-Farm Payrolls this Friday. While investors are predicting that the ECB will leave monetary policy loose, they also believe the Federal Reserve may consider reducing asset purchases in the near future. The Euro remained under pressure even as the forex exchange returned to its normal trading volume while speculators look ahead to Friday’s U.S. employment figures. The 17-nation currency climbed by 0.16 percent against the Yen after Russia stated that it had detected the launch of a missile in the Mediterranean Sea. The British Pound gained versus the U.S. Dollar after further positive economic releases supported demand for the British currency. A report issued on Tuesday showed that Construction activity surged in August. And in Switzerland, the Gross Domestic Product rose by 0.5 percent in the second quarter of this year, surpassing forecasts for a 0.3 percent increase. According to analysts, the data suggests that the Swiss economy managed to avert a recession due to its efforts in maintaining the currency’s value cap. In addition, Consumer Prices stopped declining in June and some economists believe that the country’s economy may fare better than that of the E.U. in 2013. The Swiss Franc dropped to a one-month low against the greenback despite the announcement of stellar economic figures.

The Yen slipped versus the U.S. Dollar as demand for the greenback improved on expectations over the Federal Reserve decision when it meets this month. The greenback traded close to six-week highs against the Yen but erased most of those gains as news indicating that a missile launch was detected by Russia in the Mediterranean, indicating that tensions in the Middle East may be escalating.

Lastly, the Australian Dollar went up to a one-week high as the Reserve Bank left the cost of borrowing money unchanged. But the currency’s gains dissipated after domestic announcements confirmed a wider Current Account deficit and a lower than anticipated climb in Retail Sales. New Zealand’s Dollar on the other hand appreciated after private publications denoted that the nation’s commodity export prices jumped 0.7 percent last month.

EUR/USD- Euro Down Following ISM Data
The Euro continued to hover close to six-week lows after the U.S. announced that its ISM Manufacturing Index climbed in the month of August, reinforcing forecasts for a reduction in stimulus. The shared currency was also weighed down by speculation that the European Central Bank will keep the main interest rate low to bolster recovery.

GBP/USD- Sterling Supported By Construction
The British Pound extended gains against the greenback and remained steady following a release out of the U.S. showing an expansion in its Manufacturing sector. In the U.K., the Chartered Institute of Purchasing & Supply announced that Construction PMI climbed from 57.0 to 59.1 in August, despite the fact that economists estimated it would only rise to 58.3. These figures pointed to the fact that businesses have expanded at the fastest pace in six years. The numbers were just as positive as those issued on Monday, when official data revealed that activities in the Manufacturing area climbed to more than a two year high, and bolstered speculation that the Bank of England may increase the interest rate.

USD/JPY- Yen Dips On Global Outlook
The Yen traded at the lowest price since August 2nd against the greenback on signs pointing to an overall improvement for several of the world’s major economies –a factor that has dampened appeal for refuge currencies. On the data front, the Bank of Japan indicated that it has expanded its monetary base to 177 trillion Yen. The BOJ purchases over 7 trillion Yen in government bonds per month as a means to raise the supply of money by the conclusion of 2014, and in an effort to reach its inflation goals. In other news, the Japanese government stated that Core Consumer Prices which don’t include food costs climbed 0.7 percent from the previous year. This was the biggest jump in 4 ½ years and it exceeded the Bank of Japan’s estimates. Economists explained that most of the increase resulted from higher energy costs. Furthermore, the rate of Unemployment dipped to 3.8 percent, the lowest since 2008. A hike of 2.4 percent in summer bonuses bolstered wages to 0.6 percent in July, the first stellar reading since spring of 2012.

AUD/USD- RBA Leaves Cash Rate Unchanged
The Australian Dollar gained after China release positive economic reports indicating growth for its manufacturing sector. However, domestic metrics showing that Retail Sales merely climbed 0.1 percent and the Current Account Deficit expanded caused the Aussie to decline. According to official data, the deficit widened as it went from AUD$8.7 billion in the first quarter to AUD$9.4 billion in the second quarter. The Aussie currency rebounded after the Reserve Bank indicated it was leaving the costs of borrowing money at a record 2.5 percent and did not mention the possibility of further cuts. The bank’s governor, Glenn Stevens, suggested that policy makers would assess the welfare of the economy before making any changes in policy.

Today’s Outlook
Today’s economic calendar shows that the E.U. will issue data on Services PMI, GDP and Retail Sales. The U.K. will release Services PMI. The U.S. will report on Trade Balance and the Beige Book. Japan will publish its Interest Rate Decision. And Australia will announce the Trade Balance.