In the wake of speculations that the US Federal Reserve may begin to implement a process of stepping away from their quantitative easing measures over the course of the coming year, many hedge funds have reportedly begun to lower their bets on gold. This move follows a previous rise on the price of gold as hedge funds seeked out safer venues of investment during the economic downturn in the US.
This moving away from investments in orders for gold comes as a series of strong reports on the US economy have emerged, pointing to a growing recovery. As such, many investors are likely to decide that it may be time to return to the USD.
Analysts believe that traders can expect to see a drop in the price of gold as demand drops. Moreover, despite recent volatility, there remains a possibility that the USD may begin to rise in its pairings. That said, it is unknown when these changes will take full effect. Investors are advised to follow closely the statements from the Federal Reserve, and particularly those of its chairman, Ben Bernake who has made numerous variations on where he sees the direction of the Fed in recent weeks, causing tumult in the markets.
Yen Loses on Unanticipated Slowdown Rate
Following a short-termed streak of strong showings last week, the Yen has reportedly taken a significant fall after the release of the nation’s Gross Domestic Product report yesterday 11 August 2013. While many investors have been aware of Japan’s weakened economy that has dogged the island nation’s currency over the past year, the lower than expected GDP findings proved to have a strongly negative effect on the Yen.
Analysts point to the belief among traders that the poor GDP report will force the Bank of Japan to increase their easing efforts to help rebound the struggling economy. As has been mentioned in past reports, intensive stimulus activities by government authorities generally scare off investors, causing them to devalue the currency in trading.
Analysts are concerned that the newly re-elected Japanese government is unlikely to implement many of the reforms to the economy that experts have recommended for boosting the recovery efforts. Chiefly among them have been concerns over difficulties on hiring and firing policies which experts have pointed to as stemming job growth.
Investors are advised to proceed with caution as the Yen is likely to suffer increased volatility in the days and weeks ahead in its pairings against rival currencies.
UK and Germany to Release CPI Reports
Two of the strongest economies in Europe are set to issue their monthly Consumer Price Index figures for the month of July tomorrow 13 August 2013. Currently, many experts believe that the CPI for Germany will likely remain constant from the month of June. Conversely, observers have cited an increased likelihood that the CPI for the UK will drop somewhat.
Analysts remind readers that the Consumer Price Indicator helps to provide a point of reference from which economists can better judge the state of the economy. Moreover, it helps to anticipate changes in inflation, thus affecting the value on the currency in question.
Analysts believe that a drop in the CPI for the UK would add to the string of reports pointing to a growing recovery of the economy. For its part, Germany as a part of the Eurozone and a major manufacturer is likely continuing to struggle with the hardships of the monetary union. That said, it is too early to say what direction the economic powerhouse of Europe will move in as it attempts to inch towards a recovery.
Analysts advise traders to proceed with caution in trading with both of these currencies in their pairings during trading due to the potential for fluctuations surrounding these reports.