AUD Leads The Pack, JPY Stumbles, CAD Lags, Metals And Crude Oil Bid

of its rivals through the North American session with AUD/USD stronger to US$ 0.9214, EUR/AUD lower to A$ 1.4501, AUD/JPY testing ¥89.76, and AUD/CAD higher to C$ 0.9526. The move higher in A$ reflects interest rate expectations as swaps markets are now projecting no additional rate cuts from RBA for the first time since July 2011. RBA’s Debelle reported Aussie banks will require A$ 300 billion in additional liquid assets to meet Basel III capital adequacy standards.

The Japanese yen was weaker against most rivals as USD/JPY tested ¥97.75, EUR/JPY reached ¥130.42, GBP/JPY gained to ¥152.73, and CHF/JPY improved to ¥105.51. Data released earlier this week painted a mixed view of the Japanese economy with a moderation of GDP during Q2, continued weak business investment, industrial production and capacity utilisation negative in June, and June machine orders moving in the wrong direction. One topic receiving a lot of attention concerns changes to Japan’s consumer and corporate tax structures with ratings agencies calling on Japan to boost consumer tax rates to sustain its credit ratings.

The Euro was mixed against its rivals through the North American session following a busy day of data releases. EUR/USD came off to US$ 1.3320, EUR/GBP gained a little ground to £0.8553, and EUR/CHF traded as low as CHF 1.2329. The Eurozone June current account and trade balance remained positive and Eurozone June consumer prices were -0.5% m/m and up 1.6% y/y with the core rate up +1.1% y/y. Inflation remains relatively tame in the Eurozone and the ECB will not be pressured to unwind monetary accommodation anytime soon. The ECB today announced a €650 million three-year LTRO repayment. Germany’s Merkel rejected a call to cut Greece’s outstanding debt, saying it would lead to European uncertainty.

The U.S. Dollar lacked direction against most rivals through the North American session with the British pound lower to US$ 1.5606 and USD/CAD higher to C$ 1.0359. Today’s U.S. data releases saw July building permits improve to 2.7% m/m with July housing starts stronger at +5.9% y/y. University of Michigan August consumer sentiment fell from 85.1 to 80.0, far below expectations. Q2 non-farm productivity improved to +0.9% and Q2 unit labour costs were up +1.4%. The big focus for the U.S. Dollar remains the Fed’s eventual taper of QE policies, as possibly as early as next month. Fed officials this week underscored the idea that any such decision will depend on upcoming data.

Gold extended weekly gains through the North American session, trading as high as $1374.64 before ceding some upside. The metal took its cues from a couple of primary drivers this week. First, there is speculation that the Fed may not withdraw monetary accommodation as quickly as previously thought, and the idea of a more gradual taper has Gold bulls excited. Some trading desks believe that as U.S. 10-year Note yields inch higher toward a 3.0% handle, the Fed may be more cautious about tapering, and this could lead to a renewed bid for Gold. Second, there is talk that JPMorgan Chase is short a significant quantity of Gold for delivery, and has been purchasing the metal in the market. Third, recent data indicated that despite less demand this year from central banks and monetary authorities, consumer demand has skyrocketed in India and China.