Daily Report: EUR/USD, GBP/USD, USD/JPY And XAU/USD : June 28, 2013

The U.S. Dollar weakened against the majority of its trading peers after Federal Reserve officials suggested that the country had not achieved enough economic recovery to warrant reducing the monthly asset purchases. The greenback remained weak while global bond yields steadied, European bond yields fell overnight and China’s SHIBOR rates settled close to 5.56 percent. Most of the volatility seen on the Forex market last week was prompted by a hike in Chinese and U.S. yields. Yesterday’s data out of the U.S. indicated that Personal Incomes rose 0.5 percent and Personal Spending increased 0.3 percent. According to analysts, the metrics will certainly please the Federal Reserve as they confirmed a healthy upward trend. Other releases showed that the PCE deflator climbed 0.1 percent, denoting that inflationary pressures are rising. In the Employment sector, Claims for Unemployment Benefits dipped from 355,000 to 346,000, suggesting that the sector was showing signs of recovery. The greenback rallied versus the majors early in the session when the National Association of Realtors stated that the Existing Home Sales Index went up by 6.7 percent in May while economists anticipated it would only go up by 1 percent. Meanwhile, Gold Futures pared gains after having reached the highest price following the release of better than predicted Jobless Claims out of the U.S. In the previous days, remarkable improvement in U.S. orders for goods, a big hike in Home Values and an increase in Consumer Confidence all bolstered expectations that the Federal Reserve may reduce stimulus, which prompted Gold Prices to rise. However, with the possibility that demand for gold in India may decline because the government is attempting to curb imports of the precious metal, analysts predict that Gold Prices may slip below $1,000.00 a troy ounce.

In the Euro region, the shared currency advanced versus the U.S. Dollar after reports confirmed that Economic Confidence improved more than forecast and Money Supply posted close to prior expectations. The Euro also benefitted from surprising releases out of Germany revealing that the rate of Unemployment dropped. For now, investors will keep a close eye on an upcoming two-day European summit during which leaders will discuss banking unions among many topics. The British Pound slumped against the greenback as revisions of previously issued metrics showed that the U.K.’s Gross Domestic Product contracted more than previously indicated. In addition, the Office for National Statistics announced that Disposable Income dropped the most since 1987.

The Yen weakened against all of its trading counterparts on increased speculation the Federal Reserve may not be ready to cut back on stimulus given the recent comments issued by Fed officials who suggested that the U.S. hasn’t sustained “strong enough” recovery to warrant reducing asset purchases at this time. Lastly, the Bank of Japan announced that it would purchase over 7 trillion Yen ($71 billion) in monthly assets in an effort to move towards an inflation target of 2 percent.

EUR/USD- Draghi May Issue Bearish Comments
The Euro recouped some of its losses despite bearish comments by a number of central bankers; however, it remained under pressure as market investors predicted that European Central Bank President, Mario Draghi, will issue further bearish comments which may overshadow positive economic releases out of Germany. For now, the bank has indicated it will continue adhering to the “accommodative policies” for some time. Bank officials suggested they’ve began preparing for supervision of the region’s banks, a subject they’ll discuss during the Euro-zone’s two day summit. On the data front, the Euro rebounded from three-week lows versus the greenback after the European Commission announced that the Index of Executive and Consumer Sentiment climbed from 89.5 in May to 91.3 this month. And in Germany, reports confirmed that Unemployment Claims declined by 12,000 in June, leaving the Unemployment rate at 6.8 percent.
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GBP/USD- GDP Contracts
The British Pound took a hit and traded at three-week lows against the U.S. currency after reports indicated that U.K. Gross Domestic Product had to be revised to show that it actually contracted more than previously indicated. While Q/Q was not revised and showed that GDP climbed 0.3 percent in the first three months of 2013, YoY figures were revised down and revealed that the economy contracted 7.2 percent, which was more than the previously posted 6.3 percent. According to the Office for National Statistics, Household Disposable Income dropped 1.7 percent from the earlier three months, and this is the biggest dip since 1987. The Pound remained low amid speculation over whether the Federal Reserve will cut back on stimulus or not.
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USD/JPY- Yen Trails The Nikkei
The Yen depreciated against the U.S. Dollar and followed the Nikkei’s increases throughout the Asian trading session. And while there was no news out of China, the interest rates continued to fall. The three-month SHIBOR rate dipped for a fifth consecutive day, a factor that helped the Yen erase some of its losses. Meanwhile, Japanese officials suggested that the G-20 financial leaders would likely discuss cutting back on monetary stimulus when they meet in Moscow. They also intimated that they’d like to hear what China plans to do regarding the credit crunch and its opinion on foreign currency policies. The G-20 summit will start on July 18.. The Yen dipped further against the greenback in anticipation of the U.S. Jobless reports.
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XAU/USD-Gold Down, Housing Up
Gold Prices declined on Thursday after the U.S. National Association of Realtors announced that Pending Home Sales climbed by 6.7 percent in May rather than the anticipated 1 percent. And YoY, Home Sales increased 12.5 percent surpassing expectations for an 8.3 percent hike. The positive reports rekindled speculation the Federal Reserve will begin to cut back on stimulus despite dovish comments by Fed officials. Gold Futures for August delivery dropped 1.28 percent and settled at $1,214.05 a troy ounce on the Comex Division of the New York Mercantile Exchange.
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Today’s Outlook
Today’s economic calendar shows that Japan will report on Construction Orders and Housing Starts. The U.K. will release Nationwide HPI. The Euro region will issue data on German CPI, Spanish Current Account, and Italian Business Confidence. Lastly, the U.S. will announce Chicago PMI and Michigan Consumer Sentiment.