USD Weak On Heightened Risk Appetite

The U.S. Dollar weakened against most of its peers as risk appetite improved in the market following the release of better than expected data out of Germany, the Euro region’s biggest economy. The figures were posted one day after the Euro region reported that German Factory Orders also surpassed forecasts in March, suggesting the E.U.’s biggest economy is gaining momentum. The news dampened expectations that the European Central Bank will cut the benchmark interest rates and weighed on the greenback as demand for the shared currency remained strong. The U.S. currency dropped further as stock prices rose on Wall Street, prompting investors to pull out of their Dollar trades. Meanwhile, gold prices rebounded as the U.S. Dollar declined after Germany released stronger than predicted industrial output metrics. Prices also increased as market investors opened positions on the hope that demand for the precious metal will improve in China during the months to come.

The Euro rallied the most in three weeks against the U.S. Dollar after Germany announced that its Industrial Production went up for the second month in a row in March. Germany’s Industrial output includes electricity, mining, gas and manufacturing concerns, and these showed the biggest hike in a year. The figures fueled optimism the region’s largest economy may post ample growth figures for the first quarter of 2013. Markets in France, Germany and Switzerland are closed for national holidays today. The British Pound advanced the most in close to two weeks against the greenback on speculation the Bank of England will leave the current quantitative easing program unchanged when it concludes its two-day policy meeting today. The Sterling rallied versus most of the majors following official reports which revealed that Home Prices went up in April, and it received support even as Retail Sales fell last month. The U.S. Dollar traded more or less unchanged against the Swiss Franc despite the fact that market sentiment turned positive after China reported solid Trade Balance data. According to official figures, China’s imports and exports climbed more than anticipated last month, causing the country to sustain a Trade Surplus of 15.05 billion Dollars. In Switzerland, the Consumer Price Index stayed flat, disappointing investors who had predicted a 0.1 percent rise.

The Yen traded higher against the U.S. Dollar, although its gains were limited, as appetite improved subsequent to the release of stronger than predicted Chinese data on Trade Balance. Sentiment improved in the market once China announced that its imports and exports advanced more than forecast. The numbers fueled Asian equities and Japan’s Nikkei reached the highest level since 2008. But the Yen remained under pressure on speculation the Bank of Japan may implement further easing to boost economic growth.

Lastly, in the South Pacific, New Zealand’s Dollar traded at a five-week low versus its American peer on comments by the Reserve Bank’s Governor, Graeme Wheeler, in which he indicated that the bank may continue selling the Kiwi in an effort to lower the currency’s value and bolster exports. Australia’s Dollar edged higher against the greenback and rebounded from two-month lows after China released stellar Trade Balance figures even as investors continued to speculate on whether the European Central Bank will cut the key cash rate again.

EUR/USD: Germany Surprises Markets
Better-than predicted data from Germany’s factories pushed the value of the Euro up against the U.S. Dollar and suggested that the Euro-zone’s biggest economy may be gaining traction. Germany’s Industrial Production climbed 1.2 percent in March, while economists predicted it would decrease by 0.1 percent. The metrics fueled expectations that Germany may show its economy expanded in the first quarter after it posted a 0.5 percent contraction in the last three months of 2012. The positive news also increased speculations the European Central Bank may hold off from lowering the costs of borrowing money again.
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GBP/USD: Pound Up On Strong Sentiment
The British Pound climbed the most in close to two weeks versus the U.S. Dollar as risk appetite improved following better than predicted German Industrial Output data. Official metrics revealed that Industrial Production climbed 1.2 percent, surpassing forecasts. In the U.K., traders are keeping an eye on the International Monetary Fund as it prepares to issue the yearly assessment for the U.K.’s economy. Meanwhile, the Sterling remained supported as Lloyd’s Banking Group Plc’s Halifax unit indicated that Home values climbed 1.1 percent in April, which is more than forecast. However, Retail Sales dipped 2.2 percent last month, suggesting that the country isn’t in full-recovery mode. Today, the Bank of England concludes its monetary policy meeting. Investors speculate the central bank will refrain from expanding stimulus at this time.
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XAU/USD: Gold Futures Post Huge Gains
Gold Futures sustained the largest gain in close to two weeks as demand for the precious metal increased in countries like China and India, the biggest consumers of gold. Figures showed that imports by China more than doubled to record highs in March, and India purchased over 100 metric tons in May. Gold prices also rallied as the U.S. Dollar declined following the release of better-than anticipated Industrial Production data out of Germany. Gold Futures for June delivery climbed 1.76 percent and settled at $1,474.25 a troy ounce on the Comex Division of the New York Mercantile Exchange.
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AUD/USD: Aussie Benefits From Chinese Data
Australia’s Dollar rebounded from two-month lows against the U.S. currency after China reported that its imports and exports went up more than predicted in April, suggesting that the outlook for the country’s economic growth remains positive. According to official metrics, imports climbed 16.8 percent, while exports gained 14.7 percent YoY. The numbers helped the country bring its Trade Surplus to 18.6 billion U.S. Dollars while analysts had only anticipated a surplus of 15.05 billion U.S. Dollars.
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Today’s Outlook
Today’s economic calendar shows that Japan will issue the Leading Index and Adjusted Current Account. The E.U. will release the ECB’s Monthly Report. The U.K. will announce Industrial Production, Manufacturing Production, the BOE QE Total, NIESR GDP Estimate and Interest Rate Decision. The U.S. will publish the Initial and continuing Jobless Claims. Lastly, Australia will issue the RBA’s Monetary Policy Statement.