The U.S. Dollar weakened against the majority of its counterparts amid speculation central banks from around the globe may implement new measures in order to bolster economic growth. The greenback remained under pressure following Monday’s reports which showed that Manufacturing contracted for the first time since the summer of 2009, thereby increasing the likelihood of a third round of quantitative easing by the Federal Reserve. Other releases revealed that U.S. Factory Orders rose for the first time in three months to a seasonally adjusted 0.7 percent in May. The Canadian Dollar rallied to a six-week high versus the greenback after crude oil reached $88.04 a barrel in New York. The Loonie extended gains versus its American counterpart on the possibility that European and Chinese central banks may opt for further monetary stimulus in order to accelerate economic growth. The Canadian Dollar was also supported by the belief that the European Central Bank will lower the interest rate this week.
The Euro advanced against the U.S. Dollar in anticipation of this week’s monetary policy meetings during which central banks are expected to increase stimulus to bolster growth. The shared currency extended gains versus the greenback following a Department of Commerce release indicating that U.S. Factory Orders climbed 0.7 percent in May. In the U.K., an index revealed that Construction declined at the quickest pace in two and a half years, causing the British Pound to weaken against the U.S. Dollar. Lackluster metrics added to the likelihood the Bank of England will expand its bond purchase program by 50 billion Pounds.
The Yen slipped against all of its most traded peers as risk appetite increased on forecasts the world’s central banks will soon step up efforts to bolster economic growth. Japan’s currency had advanced on Monday versus the U.S. Dollar after the ISM confirmed that the U.S. Factory index shrunk for the first time in 36 months.
In the South Pacific, the Australian Dollar advanced to a two-month high versus the greenback after figures confirmed that the nation’s Home Building Approvals rose in May, thereby suggesting the economy is expanding. The New Zealand Dollar remained strong as Asian stocks went up for a fifth day, fueling demand for high-risk assets. The Aussie Dollar pared gains after the Reserve Bank of Australia kept the interest rate unchanged.
EUR/USD- ECB May Cut The Interest Rate
The Euro managed to gain versus the greenback following the release of better than predicted U.S. economic data. Investors are speculating that the European Central Bank may implement stimulus to bolster growth in the region. In addition, the peripheral bond yields continued to drop despite the fact that E.U. leaders haven’t decided how the ESM will proceed with the purchase of bonds in secondary markets. Investors believe the ECB will cut the costs of borrowing money when it meets this week.
GBP/USD- Construction Drops
The British Pound fell against the U.S. currency as Construction PMI posted below 50, increasing the likelihood the Bank of England will opt for further easing. According to analysts, Construction declined due to weaker business and the additional holiday in the month of June. Official data showed that the Construction Purchasing Manager’s Index slipped to 48.2 after it posted at 54.4 in the month of May. The Sterling remained weak after the U.S. issued better than expected economic data, while market investors wait on the outcome of a number of monetary policy meetings scheduled for this week.
USD/CAD- Crude Oil Rallies
Commodity currencies, including Canada’s Dollar, gained on prospects the major central banks around the world will step up measures to increase economic growth after a slew of lackluster data showed that many global economies have slowed down. The Canadian Dollar advanced as crude oil, its biggest export, rallied during the U.S. session. Crude reached $88.04 a barrel on the New York Mercantile Exchange. The price of crude oil rallied amid growing tensions between Iran and the U.S.
AUD/USD- RBA Maintains Current Interest Rate
The Australian Dollar traded at a two-month high versus the greenback after the Reserve Bank kept the interest rate unchanged at 3.5 percent and economic reports indicated that the nation’s economy expanded while Building Approvals rose. The central bank’s Governor, Glenn Stevens, stated that bank officials made the decision to leave the costs of borrowing money at the same rate as inflation is forecast to fall in line with the target. Official figures showed that Construction Approvals surged by 27.3 percent, exceeding expectations for a 5.1 percent hike.
Today’s economic calendar shows that the U.S. market is closed in observance of Independence Day. The E.U. will report on Services PMI, GDP and Retail Sales. The U.K. will release data on Services PMI and Housing Equity Withdrawal. Lastly, Australia will issue the Trade Balance.