Daily Report: US Dollar Rallied Against Majority Of Its Peers

The U.S. Dollar rallied against the majority of its peers and advanced versus the Euro after Federal Reserve Chairman Ben Bernanke stated that the central bank may begin scaling back on bond purchases this year and may even put an end to stimulus by as early as 2014 if the economy continues to show improvement. Mr. Bernanke went on to say that the risks, which once threatened the economy, have decreased and he anticipates inflation will remain at or beneath the 2 percent target. Prior to the announcement, the greenback showed slight changes as investors remained on the sidelines while awaiting further indications on the future of U.S. monetary policy. Meanwhile, Gold Prices held steady and sustained minor changes as chairman Bernanke suggested that the risks which could have affected the U.S. economy have decreased and the central bank will continue to purchase $85 billion in bonds per month for now. Gold prices remained unchanged as Mr. Bernanke went on to say that the FOMC is prepared to lower or raise asset purchases depending on what the Employment sector shows over the coming months. Gold Futures for August delivery climbed 0.1 percent and settled at $1,367.80 on the Comex Division of the New York Mercantile Exchange.

The Euro fell versus the U.S. Dollar as Mr. Bernanke delivered the FOMC’s policy decisions. The shared currency continued to trade low as Mr. Bernanke reiterated that the central bank plans to maintain the benchmark interest rate close to zero so long as Unemployment stays above 6.5 percent and the prospects for Inflation don’t surpass 2.5 percent. In the Euro region, Cyprus requested that its bailout terms be re-valuated; however, officials said they were not willing to revise the terms at this time. The British Pound weakened versus the greenback following the Fed Chairman’s press conference, but it was mostly affected by the release of the Bank of England’s Monetary Policy meeting minutes. These revealed that three members of the bank’s committee supported the idea of expanding stimulus. One of the three members included the bank’s Governor, Mervyn King, who is now being replaced by Mark Carney. The vote to keep the key cash rate at 0.5 percent, however, was unanimous. The Sterling rose versus the Euro.

The Yen dropped versus the U.S. Dollar as Fed Chairman Bernanke indicated the monetary authority may begin to cut stimulus in the latter part of 2013. For now, Mr. Bernanke left the cost of borrowing money unchanged and the monthly asset purchases at $85 billion per month.

Lastly in the South Pacific, the Australian Dollar extended losses against its U.S. peer in anticipation of the Fed Chairman’s press conference. The Aussie dipped to the lowest price in close to one week on speculation the U.S. central bank may begin to cut back the monthly asset purchases. The New Zealand Dollar, on the other hand, advanced versus the greenback on data which showed that the Current account Deficit contracted.

EUR/USD-Downside Risks Decrease
The Euro fell against the U.S. Dollar as the Federal Reserve’s Chairman indicated that the downside risks to the world’s biggest economy have decreased. The shared currency continued to trade low as Mr. Bernanke announced the bank’s decision to maintain the interest rate and policy measures unchanged for now. The central bank will still purchase $85 billion in assets every month, but will consider scaling back if the economy continues to show signs of improvement. Despite “inflationary pressures” investors opted for the greenback. The Euro came close to the highest price against the greenback since February when the Swedish Krona climbed to a two-month high versus the U.S. currency early in the day.
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GBP/USD- BOE Releases Minutes
The British Pound dropped against the U.S. Dollar while the U.K.’s government bonds climbed for the first time in close to one week as the Bank of England released the minutes from the recent Monetary Policy meeting. These revealed that a few of the officials suggested that additional stimulus was needed to bolster growth. Policy makers went on to say that the inflation outlook was rather “favorable,” but they suggested that inflation may stay above 2 percent for the remainder of 2013. The bank left the benchmark interest rate at 0.5 percent, and the minutes show that all officials were in favor of such. The Sterling remained under pressure as the Federal Reserve’s Chairman Ben S. Bernanke announced that the central bank will leave the key cash rate and loose monetary policy unchanged at this time, but may consider changes depending on what the Employment sector shows in the coming months.
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NZD/USD- Current Account Deficit Narrows
The New Zealand Dollar rallied against the U.S. currency as domestic reports indicated that the country’s Current Account Deficit contracted. According to official metrics, Current account went from NZD3.26 billion deficit in the last three months of 2012 to NZD 0.66 billion in the initial quarter of this year. Gains were limited however, as investors looked forward to the Federal Reserve’s decision on U.S. monetary policy.
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USD/JPY- Dollar Gains On Bernanke’s Words
The Yen dropped against the U.S. Dollar as the Fed’s policy makers indicated they’ll continue to purchase $85 billion in bonds per month, and suggested that the risks to the country’s economy have ebbed. The Yen remained under pressure as the Fed Chairman, Ben S. Bernanke stated that the central bank lowered its predictions for Unemployment and Inflation for 2013.
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Today’s Outlook
Today’s economic calendar shows that Switzerland will issue the Trade Balance and Interest Rate Decision. The Euro region will report on Consumer Confidence, Services and Manufacturing PMI. The U.K. will release Retail Sales, Core Retail Sales and CBI Industrial Trends Orders. The U.S. will announce Initial and Continuing Jobless Claims, as well as Manufacturing PMI, Existing Home Sales and the Philadelphia Fed Manufacturing Index.