The U.S. dollar plummeted against the majority of its foreign currency counterparts following the release of economic reports indicating that the U.S. Trade Deficit narrowed, though the contraction was less than predicted. According to official news, the deficit shrank by 3.6 percent and posted at $40.4 billion after coming in at $41.9 billion a month prior. Economists stated that the U.S. has sustained the biggest advance in exports in nine months, a factor that contributed to the deficit’s contraction. However, the slowdown in trading activities caused the initial quarter’s gross domestic product to come in lower than expected. An official announcement revealed that exports surged from $190 billion in February to $193.9 billion in March due to a higher demand from Canada, Central America, South Korea and the Dominican Republic; and exports to Germany were at the highest level since 2008. Analysts believe that the numbers point to solid improvement for the world’s largest economy. Gold prices jumped to a three-week high but slumped slightly following the announcement of the U.S. Trade Balance. Futures for delivery in June traded at $1,308.80 on the New York Mercantile Exchange. The precious metal appreciated on Monday as headlines around the globe reported on clashes between Russian and Ukrainian forces in several parts of Eastern Ukraine, boosting concerns that the violence could escalate into a full-blown war. U.S. Secretary of State John Kerry warned Russia that the U.S. is ready to impose new sanctions unless it refrains from offering support to pro-Russian militants.
In the euro region, Tuesday’s string of economic releases bolstered speculation that the european Central Bank may not institute measures to expand stimulus. Countries such as Spain and Italy showed improvements in their Services sectors, a factor that fueled the euro, causing it to rally to a seven-week high against its U.S. peer. Furthermore, the region posted a hike in Retail Sales, prompting the euro’s rally versus the yen. The British pound climbed to a five-year high against the greenback subsequent to stellar announcements indicating that the Services area sustained growth, and the sector created Employment opportunities.
The yen rose versus the U.S. dollar on worries that the situation in the Ukraine is worsening as violence between the factions seemed to be escalating into a full-blown civil war. In Japan, the government is talking about its next tranche of measures, some of which include easing on labor regulations, something that worries workers.
Lastly, in the South Pacific, The Australian dollar rose against the greenback as the Reserve Bank of Australia left the interest rate and monetary policy unchanged. Other releases revealed that the nation’s Trade Surplus went down due to a decline in mining exports. But although the Surplus posted a contraction, it remained strong. New Zealand’s dollar dipped while market traders await the release of data on the Jobless Rate.
EUR/USD: Data Points To Growth
The EUR/USD surged to the highest price in seven weeks on the announcement of upbeat fundamentals out of the european Union. The first report showed that Retail Sales in the E.U. climbed 0.3 percent in March, while economists had predicted a decline of 0.2 percent. The February figures were modified to show that sales fell 0.1 percent and not the previously announced 0.4 percent. Spain confirmed that the number of unemployed individuals went down by 111,600 and not the predicted 49,100 while the Spanish Services PMI surged to the highest level in six years. The index posted at 54.0 in March. In Italy the Services PMI came in at 51.1, higher than the previously reported 49.5 in March. The EUR/USD came close to trading at $1.4000 on speculation that the ECB may not introduce further monetary easing at this time.
GBP/USD: Services Sector Expands
The GBP/USD rose to a five-year high as the gauge that measures Services Activity rose more than forecast in April, and it remained strong on news that the Organization for Economic Cooperation and Development increased the nation’s growth outlook for 2014 and 2015. The OECD stated that the U.K.’s economy could grow to 3.2 percent, rather than the previously estimated 2.4 percent while boosting the 2015 economic growth prediction from 2.5 to 2.7 percent. In addition, the U.K. Services Purchasing Manager’s Index posted at 58.7, up from 57.6. Analysts predict the GBP/USD could reach $1.7000 in the near future.
USD/JPY: Workers Grow Concerned
The USD/JPY declined after China released the final reading of the HSBC Manufacturing Index, showing a contraction for the fourth month in a row. This spurred worries that the Chinese economy is still slowing down. The lackluster metrics impacted risk appetite and bolstered demand for the yen as a safe harbor. The Japanese government continued debating about what measures to implement next. Sources say that a corporate tax reduction could come as soon as next month. However, many are still worried that Abenomics may not be the solution to the nation’s 15 years of deflation and a sluggish economy.
AUD/USD: RBA Makes No Changes
The AUD/USD gained after the Reserve Bank announced that it would leave the benchmark interest rate at 2.5 percent. Other releases indicated that the Aussie’s Trade Balance sustained a decline in the Surplus due to the drop in mining shipments. March’s trade surplus was at AUD$713 million rather than the predicted AUD$1.2 billion. The AUD/USD advanced further after the RBA indicated that the employment sector has rebounded.
Daily Outlook: Today’s economic calendar shows that Switzerland will release data on Unemployment. The euro region will issue Retail PMI. The U.S. will publish Non-Farm Productivity and Unit Labor Costs. Furthermore, the Federal Reserve’s Chairwoman, Janet Yellen is scheduled to testify before Congress. Australia will release Employment Change, the Participation Rate and the Unemployment Rate. The U.K. will announce RICS House Price Balance. And China will provide the Trade Balance.