Daily Report: US Dollar Declined Against Most Of Its Peers

The U.S. Dollar declined against most of its Forex counterparts following a release which revealed that the world’s biggest economy grew less than anticipated during the first three months of 2013. According to the Commerce Department, Gross Domestic Product expanded at an annual rate of 2.5 percent while analysts had been predicting a 3 percent growth rate. This fueled speculation the Federal Reserve would keep the current asset-purchasing program in place, at least until the economy shows improvement. The disappointing metrics sparked concern that the U.S. economy’s recovery was faltering. Market investors will keep an eye on the Federal Reserve as it’s scheduled to hold a monetary policy meeting during the week ahead. Furthermore, the U.S. will post data on the ISM and Non-Farm Payrolls; two events which analysts predict may shake up the markets. Meanwhile, Gold Futures declined, trimming the largest weekly advance in 15 months, following an announcement which confirmed that the U.S. economy expanded less than predicted in the first quarter, a factor that not only weighed on commodities but also dampened demand for the precious metal.

This week is expected to reveal important events in the Euro region as the European Central Bank prepares to issue its rate decision. The 17-nation currency rallied versus the greenback at the end of last week after the U.S. posted weaker than expected growth data. However, the Euro’s advance was limited amid speculation the ECB may cut the benchmark interest rate. This possibility intensified as it became apparent that Germany’s economy, which is the biggest in the Euro-zone, has slowed down. The index of German Business Climate denoted a decline to a four-month low. The British Pound rose to a nine-month high after reports showed the U.K. managed to avert a triple-dip recession. The Sterling strengthened versus most of its peers on comments by the Chancellor of the Exchequer in which he indicated that the encouraging numbers suggest the country’s economy is improving.

The Yen appreciated versus the greenback after lackluster growth data out of the U.S. prompted investors to seek refuge, and as the Bank of Japan failed to announce new easing measures. The Bank of Japan indicated that it may take longer to reach the 2 percent inflation target and that it may implement other stimulus measures during the latter part of the year. Markets will be closed today in Japan in observance of a national holiday.

Lastly in the South Pacific, the Australian and New Zealand land Dollars pared weekly gains as demand for high-risk assets dropped when data showed the U.S. economy expanded less than forecast. Analysts anticipate this may be an exciting week for the two currencies as China is expected to release important economic data.

EUR/USD- Investors Look Forward To The Week
Investors remain anxious this week as the European Central Bank is expected to make a decision on whether it will lower the key cash rate. Speculators anticipate that the ECB may cut the rate since most of the data released recently suggests the economy in the region may be deteriorating. Metrics reported last week indicated that the IFO index of Business Climate in Germany dipped from 106.7 to a four-month low of 104.4 in April. Furthermore, Friday’s news confirmed that Spain’s Unemployment reached a record high of 27 percent in the first quarter, meaning that over 6 million people are out of work. In addition, Unemployment in the Euro-zone remained at 12 percent in February.

GBP/USD- Sterling Hits 9-Month Highs
The British Pound climbed the most in nine months against the U.S. currency after government reports indicated that the U.K. averted a recession in the last three months, lowering the possibility the Bank of England will expand stimulus. According to the Office for National Statistics, Gross Domestic Product rose 0.3 percent while economists only expected growth of 0.1 percent. The Sterling remained strong after the U.S. released weak growth metrics, adding to speculation that the Federal Reserve won’t put an end to the current asset-purchasing program. In the days ahead, market investors will keep a close watch on data regarding the U.K.’s Manufacturing and Service sector.

XAU/USD- Gold Erases Biggest Weekly Advance
The release of disappointing growth data out of the U.S. prompted a drop in commodity prices and crimped demand for the precious metal. As the U.S. reported that GDP grew at a 2.5 percent annual rate, Gold Futures declined, trimming the largest advance in more than one year. Futures, for delivery in June fell 0.6 percent, the most in more than three decades, and settled at $1,453.60 on the Comex Division of the New York Mercantile Exchange. Prices had gained earlier in the day, when a hike in physical buying took place in places like China and Dubai.

AUD/USD- CPI Climbed
Australia’s Dollar traded lower against the greenback after demand for growth-linked currencies declined as the U.S. reported that it grew less than forecast in the first three months of 2013. The so-called Aussie had rallied against the U.S. currency on Thursday, when risk appetite improved after the U.S. issued better than forecast economic data. Other metrics released last week confirmed that Australia’s Consumer Price Index climbed 0.4 percent in the initial quarter, which is less than the expected 0.7 percent. Investors continued to trade cautiously in anticipation of this week’s announcements which will include data on China’s Manufacturing activities.

Today’s Outlook
Today’s economic calendar shows that the Euro region will report on Consumer Confidence, German CPI and Retail PMI. The U.S. will release metrics on Personal Income, Personal Spending, Pending Home Sales, and the Core PCE Price Index. New Zealand will issue data on Building Consents. And Japan will announce Industrial Production, Retail Sales, the Interest Rate Decision and Manufacturing PMI.