Daily Report: US Dollar Traded Mixed, Fell Against The Yen

The U.S. Dollar traded mixed but fell against the Yen following the release of weak Commerce Department metrics which showed that Orders for Durable Goods dropped more than predicted. According to the figures, they fell by the most in over seven months and dipped 5.7 percent in March while Core Durable Goods, which doesn’t include transportation equipment, slipped 1.4 percent. Other reports revealed that U.S. crude oil stockpiles climbed less than anticipated, prompting oil prices to go up on hopes the country will experience a steady recovery and will therefore show a higher demand for fuel and energy as it moves forward.

Meanwhile, gold prices rallied during the American trading session after the Euro region announced that German Business Confidence declined, fueling speculation that the European Central Bank may cut benchmark interest rates. According to analysts, rate cuts often cause the currencies to weaken and gold to appreciate. Gold futures gained further after the U.S. indicated that its Durable Goods Orders dipped unexpectedly last month.

The Euro traded lower against the U.S. Dollar as Durable Goods Orders fell short of expectations, and as market investors increased speculation that the European Central Bank is likely to cut the cost of borrowing money. This occurred after the IFO Institute situated in Munich announced that the index which gauges Germany’s Business Climate declined. The data was issued in the wake of worse than anticipated Euro region Industrial Production numbers. The British Pound advanced versus the shared currency on speculation the Bank of England’s recently announced loan program expansion would contribute to growing the economy. The Sterling gained the most in one week versus the Euro in anticipation of today’s reports which are forecast to show that the U.K. averted a triple-dip recession in the initial quarter of 2013. The British currency pared gains once the Confederation of British Industry’s gauge of Retail Sales posted a drop for this month.

Elsewhere, the Yen weakened against high-yield currencies like New Zealand’s Dollar on speculation the Japanese currency will continue to depreciate as investors seek assets abroad. The Yen rebounded and erased losses versus the greenback after the U.S. released data confirming that Durable Goods Orders dropped in March.

Lastly, in the South Pacific, New Zealand’s Dollar rose as the central bank decided to leave the key cash rate at 2.5 percent, citing its concern for the hike in house prices as the main reason. Australia’s Dollar remained under pressure after lackluster Inflation reports raised the possibility the Reserve Bank of Australia may opt for cutting interest rates in the coming months.

EUR/USD- Ongoing Talks Affect Euro
Despite good news out of Italy indicating that the President selected a new Prime Minister, possibly ending the political deadlock, the Euro remained under pressure on continued speculation that the European Central Bank may cut the benchmark interest rates. This became even more possible after the IFO which serves as the barometer for Business Sentiment showed a drop from 106.7 to 104.4 in April, a four-month low. Unfortunately, the release was posted in the wake of lower than forecast Euro region Industrial Production and Service sector output data.
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GBP/USD- Investors Await U.K. Data
The British Pound advanced against the U.S. Dollar in the middle of the week, although its gains were limited as investors remained cautious ahead of today’s reports which are expected to show that the U.S. managed to avoid slipping into a triple-dip recession. The Sterling benefitted briefly as equities in the Euro region rallied on speculations the European Central Bank may lower the costs of borrowing money. And it continued to trade high after the Bank of England indicated that it plans to extend funding for the Lending Program until the start of 2015 in an effort to bolster economic growth.
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XAU/USD- Gold Futures Rally
Mid-week reports showed that gold futures gained during the U.S. trading session after the U.S. showed an unexpected decline in Durable Goods Orders. The price increased further as demand for gold seemed to increase in Asia and the U.S. Gold rose by 1.03 percent to $1,423.25 a troy ounce on the Comex Division of the New York Mercantile Exchange. Gold prices were also supported by the possibility that the ECB may cut interest rates.
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USD/JPY- Yen Stronger On U.S. Data
The Yen erased early session losses against the greenback after an economic release indicated that U.S. Durable Goods Orders dropped by the most in seven months. The Yen weakened in the morning as investors speculated the central bank will continue with its aggressive monetary measures, a factor that prompted them to seek higher-yielding currencies.
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Today’s Outlook
Today’s economic calendar shows that the U.K. will report on Gross Domestic Product. The U.S. will release Initial and Continuing Jobless Claims. New Zealand will issue data on the Trade Balance. And Japan will post Manufacturing PMI, National Core CPI and Tokyo Core CPI.