AUD, GBP, NZD Strong With USD, CHF Weak; Metals, Oil Off

against major currencies through the North American session as AUD/USD climbed to US$ 0.9169, EUR/AUD fell to A$ 1.4359, AUD/JPY climbed to ¥91.29, and GBP/AUD weakened to A$ 1.7012. A$ remained bid following yesterday’s RBA decision to keep its OCR target unchanged at 2.50% without signaling additional policy accommodation. Aussie shook off a downtick in the August performance of services index to 39.0 and took some direction from Q2 GDP numbers that improved to +0.6% q/q and +2.6% y/y, exceeding expectations. July trade balance data will be released tomorrow.

The British pound was mixed against rivals through the North American session as GBP/USD climbed to US$ 1.5630, EUR/GBP fell to £0.8425, GBP/JPY gained to ¥155.64, and GBP/CHF improved to CHF 1.4647. The major data in the UK today included August PMI services and they improved to 60.5 from the prior 60.2 reading. BoE’s MPC is expected to keep its asset purchase program target unchanged at £375 billion and official interest rate targets are not expected to move for at least several quarters, given the new policy linkage to unemployment.

The Euro was knocked lower against most peers through the North American session as EUR/USD came off to US$ 1.3156, EUR/JPY weakened to ¥130.80, EUR/CHF climbed to CHF 1.2347, and EUR/NZD weakened to NZ$ 1.6662. The ECB is expected to keep its overnight call rate unchanged at 0.50% tomorrow and traders are curious to see if the ECB will clarify its forward guidance. German Chancellor Merkel remains in full campaign mode and continues to support EUR but ringfence Germany from peripheral debt issues. Eurozone August PMI services expanded but came in lighter than expected at 50.7 with German expansion leading the way. Also, Eurozone Q2 GDP printed at +0.3% q/q and -0.5% y/y, better than expected, while Eurozone July retail sales came in at +0.1% m/m and -1.3% y/y.

The U.S. Dollar was pressured against other currencies through the North American session as USD/JPY came off to ¥99.31, USD/CAD slumped to C$ 1.0477, and NZD/USD appreciated to US$ 0.7900. San Francisco Fed’s Williams said Bernanke’s June timetable remains the “best course” for QE tapering, read the party line that tapering is “data dependent,” sees low rates for a long time, and projects US GDP growth of 2% in 2013 and 3% in 2014. Today’s Fed Beige Book release may yield some recent thinking and clues about tapering. US numbers saw the July trade deficit worsen to –US$ 39.1 billion and New York August ISM came off sharply to +60.5.

Gold and Silver weakened through the North American session as Gold fell to US$ 1386.06 and was capped at $1415.01 while Silver depreciated to US$ 23.369 after finding resistance around US$ 24.391. Metals are coming off after Obama said he did not draw a “red line” regarding action against Syria and the markets viewed this as backtracking. There is talk, however, that Congress may pass a resolution today authorising action against Syria and Obama added he believes this will be the case.

Crude Oil was weaker through the North American session as Brent futures reached US$ 112.93 and were capped at $114.45 while WTI futures came off to US$ 106.61 and were capped at $108.17. South Sudan indicated it will increase output by 20% to 200,000 barrels per day. There are a lot of risk premia built into current prices and the likely commencement of action against Syria may be limited to an initial 90 days, possibly capping prices unless geopolitical go sideways.