Daily Report: EUR/USD, GBP/USD, USD/JPY And AUD/USD : September 25, 2013

The U.S. Dollar traded mixed and it managed to advance against a number of currencies while speculators were wondering if the central bank would slow the asset purchasing program, a measure that has normally contributed to the depreciation of the greenback. The U.S. monetary unit gained before yesterday’s speeches Fed Presidents Sandra Pianalto and Esther George. The U.S. Senate continued deliberations in order to find a way to keep the government running past October. Lawmakers are looking to follow the House’s recommendation which ay involve reducing financing for President Barack Obama’s Healthcare Plan. On the data front, the value of homes gained the most since 2006 on a month over month basis and the prices of U.S. homes increased 1.8 percent in July, which was slightly below forecasts. Furthermore, the Conference Board’s Index which measures U.S. Consumer confidence went down to 79.7 this month after a reading of 81.8 in August. And as risk aversion dominated the trading markets, Gold Futures tumbled to a one-week low. The shiny metal sustained the drop after the U.S. announced that the index which gauges Home Values climbed the most in seven years.

The Euro fell versus the U.S. Dollar, mostly due to the fact that speculators shied away from risk subsequent to reports which denoted only a slight increase in Business Confidence for the region’s biggest economy. The 17-nation currency traded to the downside a day after the head of the European Central Bank, Mario Draghi, indicated that another cash injection into the financial sector may ensure the Euro-zone’s recovery. The Euro was also down against the Japan’s monetary unit, though it climbed against the Sterling. The Pound was also affected by a reduction in risk appetite. Worries over the future of U.S. monetary easing prompted the Sterling to trade at a session low, and it remained down after the U.K. announced that Mortgage Approvals failed to meet forecasts. The currency did not rebound, and market traders raised speculation that the Bank of England may tighten its policies on signs the economy has expanded.

There were no new important events out of Japan, nevertheless, the Yen traded mixed versus the U.S. Dollar. Prime Minister Shinzo Abe and his cabinet continued to deliberate on the pros and cons of instituting corporate tax cuts to balance out the possible negative impact that could follow the increase in sales tax.

The Australian and New Zealand Dollars slipped versus their most traded peers as the weakening of global stocks caused investors to reach for safe havens. The two South Pacific currencies slipped against the greenback, though the latter’s rally was limited. The Kiwi declined against the Australian monetary unit after having traded at the highest price in close to five years. This took place after investors raised speculation that the Reserve Bank of New Zealand may augment the benchmark interest rate by as soon as spring of 2014. Traders also believe that Australia may cut the cost of borrowing money as well.

EUR/USD- German IFO Weighs On Euro
The Euro traded somewhat lower against the U.S. currency as the outlook for the world’s economies impacted consumer confidence and it continued to trade weak after Germany indicated that Business Confidence rose in September, though not as much as previously estimated. The IFO Business Climate Index surged to 107.7, the highest since March of 2012; however, economists had predicted it would jump to 108.2 after it hit 107.6 in the prior month. Meanwhile, the President of the central bank, Mario Draghi, stated that the ECB would continue to provide long-term loans to the financial institutions in the region in order to bolster much needed growth. The E.U.’s banks have already started to repay the ECB for loans they obtained in 2011 and 2013. However, Mr. Draghi suggested that the money markets have tightened despite efforts by regional banks to repay the LTROs.

GBP/USD- Sterling Dipped Even After Soft Data
The British Pound did not rebound despite soft economic reports out of the U.S. which denoted a drop of confidence among consumers. Demand for the greenback remained high a day after William Dudley, the head of the New York Federal Reserve, showed his support for the Fed’s decision. Mr. Dudley commented that any alteration of the current easing program will have to come after policy makers have made a new assessment of the country’s economic growth. There were no first-tier macroeconomics out of the U.K., but a report showed that Mortgage approvals posted below the anticipated amount, and investors surmised that despite the numbers, the Bank of England may make policy changes sooner than expected.

USD/JPY- Dollar Drops Lower As Confidence Slips
The U.S. Dollar traded mixed and higher at times against the Yen despite disappointing figures which revealed the biggest drop in Consumer Confidence in four months. The greenback traded lower against the Yen after reports confirmed that U.S. lawmakers are still holding talks about the debt limit, and as the Senate took into consideration a measure passed by the House of Representatives which calls for taking funding away from the Obama healthcare program. However, several leaders from the Democratic Party indicated that they won’t allow the bill to pass if it calls for such measures. The clock is ticking and the U.S. Treasury may not be able to borrow more money, which means that Federal government offices will have to close in the middle of next month. Meanwhile in Japan, the government continues to mull over their options regarding corporate tax cuts and an increase in sales tax.

AUD/USD- Aussie Dips On Correction
Australia’s Dollar dropped against the greenback as the markets appeared to experience a correction following positive economic news out of China which revealed improvement in the Manufacturing sector. The volume in the currency exchange ebbed slightly as investors decided to stay on the sidelines amidst uncertainty over what the Federal Reserve may decide next. The diversity of Fed speakers has done nothing but confuse speculators, and for just that reason, risk aversion has taken over sentiment. The Aussie remained weak even against the Euro.

Today’s Outlook
Today’s economic calendar shows that the U.K. will issue data on Business Investment and the CBI Distributive Trades Survey. The U.S. will report on MBA Mortgage Applications, Core Durable Goods Orders and Durable Goods Orders, as well as on New Home Sales. The Euro-zone will release the GfK German Consumer Climate.