The U.S. Dollar traded at a two-year high against the Euro as the release of the Federal Reserve’s Minutes disappointed investors who predicted the central bank would implement further monetary easing and thereby weaken the greenback. The U.S. Dollar continued to rally versus the shared currency and the Yen after the publication of the Minutes revealed that only a small number of policy makers believe there’s a need to implement more stimulus to bolster growth in the job sector. On the data front, the U.S. Trade Deficit narrowed in May from $50.6Billion to $48.7 Billion as imports went down and exports climbed. Official reports revealed that imports declined to the lowest level in 6 months due to reduced demand for crude oil. The Canadian Dollar advanced versus its American counterpart as the Federal Reserve Minutes for June indicated that a few policy makers are in favor of expanding monetary easing measures. The Loonie pared gains later in the session following a decline in stocks as investors were disappointed by the release of the Fed’s Minutes and the fact that they didn’t offer any plans to bolster economic growth.

The Euro settled lower against the U.S. Dollar as Spain’s Prime Minister, Mariano Rajoy, presented a new budget to Parliament, which includes 65 billion Euros in austerity measures, while the E.U. indicated that bondholders won’t have to get involved in banking haircuts. According to analysts, the new budget will only prompt Spain to go into a deeper recession, especially since the Euro-zone’s Ministers failed to grant Spain additional time to reach its deficit reduction goal. The Euro remained under pressure after Germany’s top Court announced that it would take months, rather than weeks, to decide whether the region’s permanent bailout fund is compatible with German laws. The British Pound gained the most this month against the U.S. Dollar as market investors speculated the Federal Reserve’s Minutes would show that the central bank was closer to instituting further stimulus measures. The Sterling rose to the highest price since November 2008 versus the 17-nation currency on worries over a delay in legislation related to the Euro region’s bailout fund.

The Yen fell against the U.S. Dollar after the Federal Reserve’s Minutes showed that only a few of the bank’s policy makers believe there’s a need to implement stimulus measures to fuel growth in the employment market. The Yen’s losses were limited on expectations the Bank of Japan will refrain from announcing further monetary stimulus during this week’s policy meeting.

In the South Pacific, the Australian Dollar snapped a three-day drop after private reports revealed that Consumer Confidence reached a five-month high, thereby signaling the resilience of the Aussie economy. The Australian and New Zealand Dollars advanced against most of their peers as Asian stocks pared early day losses. The Aussie remained close to record prices versus the Euro on the possibility that the ECB will lower the interest rate once again, thereby boosting the yield advantage of Australian assets.

EUR/USD- Euro Falls On Fed Minutes

In the absence of economic data out of the Euro region, the shared currency drifted throughout the day and fell after the U.S. Federal Reserve published its June Minutes. The Minutes showed that while the U.S. economy expanded, the data flow from the recent period suggests moderate growth will continue in the coming months. Meanwhile, Spanish Prime Minister Mariano Rajoy announced a two-year austerity plan aimed at reducing 65 billion Euros in public debt. The Euro managed to rise slightly early in the trading session as Germany’s borrowing costs fell to a record low at an auction of 10-year government bonds.

GBP/USD- Pound Gains Most In 1-Month

The British Pound gained the most this month versus the U.S. currency in anticipation of the release of the Federal Reserve’s Policy Minutes from June. The GBP/USD moved in tandem with the EUR/USD for most of the day as there was little in terms of economic data.

USD/CAD- Trade Deficit Widened

The Canadian Dollar advanced versus its American counterpart as the Federal Reserve’s Minutes revealed that only a few policy makers supported the implementation of additional monetary stimulus. On the data front, the May 2012 Merchandise Trade Deficit expanded to $0.79 billion. The deterioration came about as a result of record high imports, while exports remained flat. According to economists, the Merchandise Trade Deficit was the widest in close to 12 months due to a big decline in crude oil exports.

USD/JPY- Tertiary Industry Index Rose

The U.S. Dollar gained against the Yen as the Federal Reserve’s Minutes indicated that a small number of policy makers believe the central bank needs to implement further stimulus to fuel growth in the employment sector. On the data front, the Tertiary Industry index showed an increase of 0.7 percent MoM, exceeding the market’s forecasts of a 0.2 percent hike. Other releases indicated that Domestic Corporate Goods Price index declined by 0.6 percent, which was more than predicted.

Today’s Outlook

Today’s economic calendar shows that the E.U. will release Industrial Production and the ECB Monthly Report. The U.S. will issue Initial and Continuing Jobless Claims, the Budget Balance and the Import Price Index. China will announce Retail Sales, Industrial Production, Fixed Asset Investment and GDP. Lastly, in the E.U. ECB President Mario Draghi is scheduled to deliver a speech.

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