Daily Report: EUR/USD, GBP/USD, XAU/USD And USD/JPY : July 09, 2013

The U.S. Dollar surged to a three-year high subsequent to the release of better than anticipated Employment data, which bolstered speculation the Federal Reserve may soon begin cutting back on stimulus. However, the greenback retreated from gains made on Monday as risk appetite increased in the markets. This week, investors will shift their attention to the Federal Reserve Chairman, Ben Bernanke, who is scheduled to deliver a speech in Boston regarding economic policy. Investors hope to walk away with clues on the future of U.S. monetary policy. Meanwhile, market trends indicated that Gold Prices were poised for their biggest fall in 13 years, as investors have lost faith in the metal’s store value. However, Gold Futures rose the most in five days and some analysts believe that prices may continue to rebound, especially as demand could go up due to an increase in the number of weddings during the second half of the year. Upcoming religious festivals in China and India, two of the largest buyer markets for Gold, would also likely influence prices.

The Euro rallied against the U.S. currency after the greenback declined from a three-year high. This took place as European and American equities went up and as E.U. Finance Ministers prepared for an upcoming meeting during which Greece’s bailout will be the main topic of discussion. The shared currency remained strong as the Troika of creditors indicated that they would approve the next bailout payment for the Greek nation. And while data released yesterday out of the Euro region wasn’t strong, the Euro continued to rally as the European Central Bank’s President, Mario Draghi, stated that current efforts to protect the banking sector, together with the idea of having a supervisory entity, will ensure the region doesn’t experience a repeat of the same problems faced in the recent past. The British Pound rebounded after it traded close to the weakest price in close to four months versus the greenback on speculation this week’s Industrial Output reports will reveal that the sector expanded in May, denoting that the nation is still in recovery mode. The Sterling also benefitted from comments by Economics Ltd., which suggested that the U.K. may be starting a period of ” catch-up growth.” The currency had dropped below the key $1.5000 psychological level last week after the Bank of England’s Governor, Mark Carney, intimated that policy makers may decide to leave benchmark interest rates at the current record lows for much longer than speculators had expected.

The Yen rallied against the U.S. Dollar at the start of the week as the decline in Asian stocks fueled demand for refuge and it received support as investors worried about China’s credit controls, which in turn prompted Chinese equities to plunge. In Japan, data revealed that investors bought a record number of U.S. Treasuries in the month of May as securities sustained the biggest decline in over three years. The more than 20 percent devaluation of the Japanese currency versus the greenback in the past year has provided incentive to fund managers to generate profits on overseas holdings.

Lastly, in the South Pacific, Australia’s Dollar fell close to the lowest rate in close to three years against its U.S. counterpart on speculation the Reserve Bank may lower the key cash rate by as soon as August. The Aussie limited some of its decline as investors believe an announcement this week will reveal that the country’s Employment sector stagnated last month. The New Zealand Dollar on the other hand, advanced following metrics which confirmed that Home Prices rose in June.

EUR/USD- Euro Rebounds
The shared currency advanced for the first time in close to one week against the greenback as risk appetite improved following a hike in European stocks. The Euro also benefitted from Dollar weakness, especially as the U.S. monetary unit retreated from three-week highs in anticipation of the Federal Reserve’s speech scheduled to be delivered tomorrow in Boston. The Euro continued on an upward trend as the region’s Finance Ministers prepared to meet in Brussels, where they’ll be addressing the Greek bailout. Meanwhile, in Portugal, Prime Minister Pedro Passos Coelho suggested that the head of the Junior Party, Paulo Portas ought to become the Vice Premier, a move that would practically secure the integrity of the coalition government. On the data front, Germany indicated that Industrial Production slipped 1 percent in May while economists forecast a 0.5 percent fall. Other releases revealed that Germany sustained a smaller than predicted Trade Surplus given that exports slipped by 4.8 percent, and Imports went down by 2.6 percent on a YoY basis.
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GBP/USD-Pound Rebounds On Forecasts
The British Pound advanced after having come close to four-month lows versus the greenback . It rallied amid speculation that this week’s reports will show the U.K.’s economy is still gaining momentum. And while the Sterling rallied, its gains were limited as market investors still sought the dollar following Friday’s solid employment reports. Data issued on Monday revealed that Business Confidence in the U.K. increased to 13-month highs last month. According to official figures, the Business Sentiment index went from 93.6 in May to 94.3 last month, the highest since fall of 2011.
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XAU/USD-Gold Rallies After Friday
Gold prices rose close to 2 percent on Monday, following better than forecast Employment data out of the U.S., which prompted investors to capture gains as the greenback hit new highs. Gold Futures climbed the most in one week amid speculation this year’s big drop in price will fuel a stronger demand. In fact, many analysts predict the upcoming Diwali Festival in India will spur demand for gold jewelry. Gold Futures for August delivery went up by 1.8 percent and settled at $1,234.90 on the Comex Division of the New York Mercantile Exchange.
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USD/JPY-Current Account Rises
The Yen saw strong gains after the greenback climbed close to record highs following strong Employment reports on Friday. Meanwhile, the Bank of Japan reported that it loaned more money than previously anticipated, and Current Account met expectations. The Account Surplus went up 58.1 percent in May from the previous year, due to the hike in exports and an increase in profits from investments abroad, two factors that contributed to a solid Balance of Payments. The Yen’s decline helped exporters, especially as the monetary unit hit record lows. Bank lending sustained the largest hike in four years, indicating that the unprecedented monetary policies are fueling demand for investments. The number of outstanding loans rose 1.9 percent in June, making this the 20th consecutive month of gains.
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Today’s Outlook
Today’s economic calendar shows that Switzerland will issue data on Retail Sales. The U.K. will report on Industrial and Manufacturing Production, Trade Balance and the NIESR GDP Estimate. Japan will issue the Minutes from the Monetary Policy Meeting, Tertiary Industry Activity Index and CGPI. China will issue releases on Imports, Exports and Trade Balance.