UK Posts Another Quarter Of Growth

27/02/2014 15:33 AST

The U.S. dollar weakened and headed for the biggest monthly slump in almost five months against the majority of its counterparts as money market investors are uncertain about the future of the U.S. economy and wonder what the Federal Reserve will do next regarding stimulus. Cautious trading brought volatility in the Forex exchange down, while the head of the Federal Reserve, Janet Yellen, is scheduled to speak today about the economy and the effects that winter has had on growth. Market traders are hopeful that her statements will provide clues on the future of monetary easing. Meanwhile, data issued on Wednesday confirmed that the U.S. Consumer Confidence Index fell to 78.1 in the month of February after a revised posting of 79.4 at the start of the year. The greenback rebounded versus most of the majors during the American trading session as the U.S. Department of Commerce announced that New Home Sales surged 9.6 percent and were up 468,000 units in the first month of this year. According to the news, this was the biggest rise in more than five years. The metrics surpassed expectations as economists forecast that sales would post a 1 percent fall. Gold prices rose to a seventeen-week high but settled lower on Wednesday as investors await Mrs. Yellen’s comments. Futures for April delivery traded between $1,337.90 and $1,345.50 a troy ounce on the New York Mercantile Exchange. The shiny metal rose to $1,341.70 an ounce during the european market hours. Analysts say it may remain supported on speculation that monetary policy will continue to be accommodative.

The euro slumped against the greenback as several factors impacted risk appetite. For starters, investors worry that the Chinese economy could slow down further, especially as the Yuan sustained a major drop on Tuesday. They worry that the Ukraine may not be prepared to repay any financial aid it receives. And they have doubts about sustained growth in the U.S. economy. Meanwhile, German Chancellor Angela Merkel is slated to deliver a speech in which she may call for the strengthening of the euro-zone. Sources say that Mrs. Merkel will reiterate comments by British Prime Minister David Cameron by calling for regional reforms while emphasizing the fact that any changes must lead to the strength of the E.U. so as to remain competitive among the global economies. The British pound advanced for a second day against the U.S. dollar subsequent to the announcement of official metrics denoting that the U.K.’s economy expanded. The Sterling dipped upon the release of solid macroeconomic fundamentals out of the U.S confirming a hike in New Home Sales.

The yen traded mixed against the greenback as Chinese data continued to impact market sentiment, but the Japanese currency declined despite comments from central bank governor Haruhiko Kuroda who suggested that the economy is on the right course to achieving the 2 percent inflation target as prices are increasing on the back of a contracting production gap. In his speech to Parliament, Mr. Kuroda added that the economy is advancing at a moderate pace. On the data front, metrics on tourism disappointed, especially since tourist activity accounts for a major segment of the Japanese economy.

Lastly, in the South Pacific, the Australian dollar remained steady against the U.S. monetary unit despite less than stellar news on Construction activity which took the Reserve Bank and investors by surprise. New Zealand’s dollar traded more or less unchanged versus the greenback as reports issued on U.S. Consumer Confidence still weighed on the U.S. currency and investors traded with caution ahead of the Fed Chairperson’s speech.

EUR/USD Low Volatility Ahead Of Speech

The EUR/USD sustained few fluctuations as the markets await Janet Yellen’s speech on the state of the economy and the negative impact that the winter season has had on its recovery. Meanwhile, in the euro region, investors look ahe

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