Tom Williams Daily Market Review -13.08.2013

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USD Reaches High on Speculation of Stimulus Cuts

It was reported on 13 August 2013 that the US dollar had succeeded in touching its highest point in over a week of trading against rival currencies. Analysts point to the increasing belief among investors and experts that the Federal Reserve may decide to begin stepping down their quantitative easing activities, which currently stand at $85 billion in bonds and other treasury purchases. 

Analysts note that traders are being spurred on by both comments by a group of four unnamed Federal Reserve officials who have stated that there may be cuts to stimulus in the near future, as well as positive figures coming out of the jobs and GDP reports in recent weeks. Should the Fed choose to reduce its stimulus actions, analysts believe that investors will likely flock to purchase increasing quantities of the USD. That said, there remains a level of hesitancy among traders as there have been a number of significant swings of opinion as Federal Reserve Chairman Ben Bernake has shifted on his position regarding the stimulus. Analysts point to the jobs reports for the next few months as being crucial in Bernake’s decision making process regarding the bond purchases.Traders are advised to remain cautious in trading with the US dollar due to the risk that the price may be pushed up artificially amidst the speculation..  

US to Release Advance Retail Sales Report

The report detailing the known Advance Retail Sales for the United States is due to be issued today 13 August 2013, providing observers with an additional insight into the state of the American economy. Analysts remind readers that this report is an important indicator of consumer demand, a crucial driver of the US economy which accounts for nearly two thirds of economic activity. Moreover, it can be taken as a test of consumer confidence, representing part of the potential spending power of the US consumer. Experts are also partial to this report due to its fast turn around, giving them much needed data before the release of the official GDP figures.

At this time, experts believe that there may be a slight drop in Advance Retail Sales from the previous month. Should this be the case, it might scare off potential investors from the USD, despite the string of positive report cards on the US economy in recent weeks.

Traders are advised to remain cautious in trading with the US dollar as the market reacts to the release of the report.

Eurozone to Issue GDP Report

The Gross National Product report for the Eurozone is set to be released tomorrow 14 August 2013, At this time, many experts believe that the report will show a negative trend for the European monetary union, possibly upsetting potential investors in the Euro. At the same time, the economic powerhouse of Europe, Germany is due to issue their own GDP report, which many believe will point to significant growth. Analysts remind readers that should the German report indeed prove to be as positive as some expect it to be, then it will mark a turnaround from negative GDP from the previous month. 

It should also be noted that many investors are counting on the German economy’s success to help push up the value of the Euro. So far, the currency has enjoyed a boost based off of the German recovery. 

Traders are advised to proceed with caution on the Euro as the mixed report from both the Eurozone as a whole and Germany may cause volatility in the market.