The U.S. Dollar traded lower against most of its counterparts as risk appetite increased in anticipation of the two-day Federal Reserve policy meeting which ends today. However, the central bank has so far refrained from implementing another round of quantitative easing, though the Fed chairman, Ben Bernanke, indicated there was still a possibility. On the data front, the Chicago Purchasing Manager’s Index showed an increase to 53.7 in July, defying forecasts of a decline. Other releases confirmed that Consumer Confidence rose to 65.9 this month and Personal Spending remained stagnant during the month of June while Personal Income advanced 0.5 percent. The Canadian Dollar headed for a second monthly advance versus its American counterpart on the possibility the Federal Reserve and the European Central Bank will expand liquidity. However, the currency dipped after an official release revealed that the country’s economic expansion failed to meet expectations.
The Euro rallied against the greenback after lackluster data out of the U.S. pushed the value of the American currency down. The Euro’s gain were supported by optimism that the European Central Bank will step up measures to prevent borrowing costs from increasing any further while acting to stem the debt crisis. But the 17-nation currency pared gains after Germany’s Finance Minister suggested the region’s rescue fund should not receive a banking license. The British Pound weakened against the majority of its peers subsequent to the release of an industry report showing that Consumer Confidence in the U.K. remained unchanged this month while the recession worsened. The Sterling sustained a big drop versus the Euro after Moody’s Investors Service reduced the growth outlook for the U.K. and indicated that the nation’s government may have a hard time reaching its debt-reduction goals.
The U.S. Dollar traded slightly higher against the Yen as sentiment improved in the market on the possibility that central banks from around the world may soon implement further stimulus in order to bolster economic growth. In Japan, data revealed that manufacturing contracted for the second consecutive month.
Lastly, the Australian and New Zealand Dollars rallied against the greenback as demand for risk assets improved on optimism that global central banks will step up easing measures to support growth. But the Aussie’s gains were limited by market investors who remain cautious over the fact that their expectations may not be met. In New Zealand, the central bank announced that the Index for Business Confidence increased to 15.1 in July after it posted at 12.6 in June.
EUR/USD- Euro Rallies On ECB Expectations
The Euro gained against the greenback subsequent to the release of mixed economic data out of the U.S. as well as optimism the ECB will intervene in order to tackle the region’s deepening debt crisis. The value of the shared currency hardly changed after reports showed that Consumer Price Inflation in the Euro-zone remained at 2.4 percent in July. However, the currency’s gains were limited as the Unemployment Rate advanced to 11.2 percent, establishing a new record high. Meanwhile, German Unemployment did not change from 6.8 percent though Italy’s Unemployment reached 10.8 percent in June, which was the highest rate since 1999.
GBP/USD- U.K. Recession Deepened
The British Pound traded lower against the U.S. Dollar as market investors await the full results of the Federal Reserve’s two-day meeting. The Sterling was also weighed down by lackluster data which confirmed that the U.K.’s economy contracted more than anticipated in the second quarter. Investors are anticipating that the Bank of England will leave the benchmark interest rate unchanged and won’t alter the asset-purchasing program at this time. But in a private report, data indicated that Consumer confidence remained in negative territory for the month of July, suggesting the BOE may increase the asset-purchasing program.
USD/JPY- Manufacturing Declines
The Yen fell against the U.S. Dollar as optimism in the market over possible action by the central banks to bolster growth improved appetite for risk assets. On the data front, government releases showed that Cash Earnings declined down to 0.6 percent in June after they had fallen by 1.1 percent in June. Other figures revealed that Household Spending increased 1.6 percent in June, falling below forecasts of a 3.0 percent hike. This data followed a report which showed that Manufacturing dropped from 49.9 to 47.9 this month. The Yen also slipped versus the Euro.
AUD/USD- Aussie Trades At 4-Month High
The Australian Dollar traded at a four-month high versus the greenback on speculation that global central banks will increase stimulus to support growth. On the data front, reports showed that Building Approvals declined, though less than predicted. According to official figures, these went down 2.5 percent after they had increased 2.7 percent in June. According to analysts, Building approvals were forecast to fall 14.6 percent. In addition, the Reserve Bank of Australia stated that Private Sector Credit went up 0.3 percent, though a hike of 0.4 percent had been expected.
Today’s economic calendar shows that the U.K. will report on Nationwide HPI and Manufacturing PMI. The E.U. will release data on Manufacturing PMI. The U.S. will issue ADP Non-Farm Employment Changes, the ISM Manufacturing Index, FOMC Statement and Interest Rate Decision. Australia will publish figures on Retail Sales and the Trade Balance.