Daily Report: Investors Await Fed's Move, Dollar Weakens

While there were no major economic releases out of the U.S. yesterday, investors continued to wait for clues as to whether the Federal Reserve will begin cutting back on monthly asset purchases. The greenback erased gains against most of its peers as investors look forward to the release of important fundamentals which may provide signs on what the central bank will do next. In the meantime, Gold Prices rose as the U.S. Dollar weakened.

The Euro increased against the U.S. Dollar after the Dollar Index managed to break through a key level and received support as global stock markets recovered from a volatile day of trading on Tuesday. Nevertheless, the Euro traded mixed throughout the course of the day as market investors remained uncertain as to whether upcoming data on Initial and Continuing Jobless Claims would prompt the Federal Reserve to consider scaling back on the current level of stimulus. The shared currency also benefitted from positive metrics which indicated that Industrial Production rose in the region. The British Pound traded at a three-week high versus the Euro and rallied against the greenback subsequent to government reports which showed that Jobless Claims in the U.K. dropped more in May than economists had predicted. Furthermore, the Unemployment Rate remained unchanged, supporting the belief that the country’s economic recovery remains on track.

The Yen traded up and down versus the U.S. Dollar but dropped early in the morning on speculation that Tuesday’s rally was excessive given the fact that it was prompted by the likelihood the Bank of Japan would expand the stimulus program in the near future. The greenback fell 2.7 percent on Tuesday when the Japanese central bank announced it would not implement further easing. In Japan, economic announcements confirmed that Machine Orders slipped 8.8 percent after having gone up over the preceding two months.

Lastly in the South Pacific, the Australian Dollar snapped three days of declines after having reached the lowest price in close to three year against its U.S. counterpart. This took place after technical indicators suggested the recent sell-off was somewhat “overdone.” The Aussie benefitted further from official metrics which revealed that Consumer Confidence went up in June after plunging the most in one and a half years. And New Zealand’s Dollar advanced in anticipation of a decision from the Reserve Bank on currency intervention.

EUR/USD- Region Sees Hike In Production
The Euro advanced against the U.S. Dollar following the recovery of global equities, a factor that increased risk appetite in the market. Despite the hike in risk tolerance, trading was volatile as investors are keeping an eye to obtain clues on what the major central banks will do next. In the Euro region, data showed that Industrial Production went up 0.4 percent in April even though economists forecast a 0.2 percent drop. YoY, Industrial Production fell 0.6 percent while analysts called for a 1.2 percent contraction.
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GBP/USD- U.K. Recovery On Track
The British Pound rallied against the U.S. Dollar after May’s Employment reports exceeded forecasts. According to the Office for National Statistics, the number of Jobless Claims dropped by 8,600 to 1.51 million, the lowest in two years. Economists had expected Claimant Count to decline by 5,000. Furthermore, the rate of Unemployment stayed at 7.8 percent, suggesting the country’s economic recovery is still on track. Investors will keep an eye on today’s auction as the Debt Management Office is expected to sell 2.25 billion Pounds in securities due in 2032.
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XAU/USD- Gold Climbs As Greenback Dips
Gold Futures gained slightly and sustained minor losses during Wednesday morning’s trading session as market investors speculated on whether the Federal Reserve and other major central banks will start scaling back on stimulus. Gold Prices rose later in the day as the greenback weakened. Futures for August delivery went up 1.06 percent and settled at $1,391.55 in the Comex Division of the New York Mercantile Exchange.
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AUD/USD- Aussie Rallies On Solid Data
The Australian Dollar advanced against its U.S. peer after having reached the lowest level in close to three years as private reports indicated that the nation’s Consumer Confidence rebounded after plunging the most in 17 months. According to Westpac Banking Corp. and Melbourne Institute, the index which gauges Consumer Sentiment climbed 4.7 percent in June after falling 7 percent in the previous month. This prompted speculation the Reserve Bank may cut the benchmark interest rate by another 33 basis points within the next 12 months.
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Today’s Outlook
Today’s economic calendar shows that Switzerland will release PPI. In the Euro region, the European Central Bank will issue its monthly report. The U.S. will announce Initial and Continuing Jobless Claims, the Import Price Index, Retail Sales and Core Retail Sales. Lastly, Japan will publish the Monetary Policy Meeting Minutes.