Daily Report: EUR/USD, GBP/USD, USD/JPY And XAU/USD : July 11, 2013

The U.S. Dollar depreciated against most of its peers following the release of the FOMC Policy minutes from June which revealed that most of the Federal Reserve officials would like to see a drop in the unemployment rate before considering a cut back of the $85 billion in monthly bond purchases. The minutes also revealed that a number of members feel confident about recent improvements the economy has shown and favor the idea of reducing stimulus. After the release of the minutes, the Federal Reserve Chairman, Ben Bernanke, stated that the central bank may put an end to the easing program by the middle of 2014. In the meantime, Gold Prices inched higher as the greenback declined. The precious metal’s prices rallied as market investors wondered whether Chairman Bernanke would offer clues on the future of quantitative easing in the U.S.

The Euro advanced versus the U.S. Dollar subsequent to the publication of the FOMC minutes, which revealed that most policy makers believe the central bank should adhere to the current level of stimulus. In the Euro-zone, the policy makers suggested several methods for handling banks facing financial problems; however, Germany objected to the ideas put forward. One proposed measure would have the European Commission decide whether the failing financial institution ought to be closed down or given assistance. But since aid would include the utilization of public funds, Germany said it would be a violation of the European Union’s laws. The British Pound rose from three-year lows versus the U.S. Dollar amid concerns the currency’s massive sell-off was overdone. The Sterling traded at the lowest price since June of 2010 on Tuesday when Factory Output disappointed by posting a major contraction for May. This prompted investors to doubt the country is indeed recovering. The Bank of England will issue Consumer Price Inflation reports on July 16, an event which may offer clues on whether officials will expand stimulus. For now, the bank has intimated it may keep the key cash rates at the current record lows for longer than expected.

The Yen gained versus the U.S. monetary unit after China announced Trade data which bolstered concerns over the prospects for global growth. Official figures revealed that Exports and Imports went down as a result of lower domestic and international demand. The Japanese currency was supported by the fact that the Bank of Japan initiated a two-day meeting, during which policy makers will discuss the country’s recent economic improvement, a subject that hasn’t come up in over two years.

Lastly in the South Pacific, Australia’s Dollar reached the highest rate in one week on the likelihood the currency’s recent drop was exaggerated. The currency managed to regain its footing early in the day. This came about after having declined due to lackluster economic releases out of China which raised concerns that trade with China, its most important commercial partner, may slow down. The New Zealand Dollar continued to trade strongly against its U.S. counterpart as the country’s Finance Minister stated that the Reserve Bank may raise the costs of borrowing money in the near future.

EUR/USD-Euro Rallies After FOMC
The Euro gained versus the greenback subsequent to the release of the Federal Reserve’s minutes from the most recent Monetary Policy Meeting. And while there were no significant economic releases out of the Euro-zone, the shared currency remained strong as the Euro region’s Finance Ministers rolled out their plan for handling banks facing critical financial problems. The plan includes a 55 billion Euro account to be used as aid. Today, the Europe Central Bank will issue an important report outlining its outlook.

GBP/USD- Risk Appetite Rises
The British Pound advanced against the U.S. currency as the Federal Reserve issued June’s Monetary Policy meeting minutes. These denoted that policy makers plan to adhere to the current stimulus plan until the Employment sector offers more signs of improvement. The Sterling continued its upward trend as risk appetite improved amid speculation China’s central bank may expand stimulus given the recent string of weak economic releases. Today, investors will keep an eye on David Miles, one of the BOE’s policy makers, as he will address the repayment of debt. Mr. Miles favors the continuation of quantitative easing in the U.K.

USD/JPY- Minutes Surprise Markets
The U.S. Dollar erased gains against the Yen after the Federal Reserve issued the Monetary Policy Meeting minutes of June, surprising investors who anticipated the central bank would begin to scale back on stimulus. According to the minutes, the Fed may not start reducing the monthly asset purchases until the end of 2013. Meanwhile, the Yen remained supported by speculation the Bank of Japan may not expand its easing program this year since the economy has shown definite signs of improvement. However, some analysts believe added stimulus may be a possibility, especially if China’s economic slowdown affects Japan’s recovery.

XAU/USD- Demand Increases
Gold Futures surged to one-week highs following the release of minutes from the Federal Reserve’s June monetary policy meeting. These indicated that most policy makers want further evidence that the Employment sector is improving before scaling back on stimulus. Meanwhile, demand for gold bars, jewelry and coins increased, contributing to the precious metal’s rally. Gold Futures for August delivery rose 0.3 percent and settled at $1,249.10 on the Comex Division of the New York Mercantile Exchange.

Today’s Outlook
Today’s economic calendar shows that the Bank of Japan may hold a press conference. The European Central Bank will issue its Monthly Report. The U.S. will announce Initial and Continuing Jobless Claims as well as the Federal Budget Balance. And Australia will publish data on Home Loans.