AUD Strongest Against Major Currencies, Gold And Silver Gain Ground

against major currencies through the European session as AUD/USD climbed to US$ 0.9047, EUR/AUD fell to A$ 1.4568, AUD/JPY climbed to ¥90.04, and GBP/AUD weakened to A$ 1.7185. As expected, RBA left the Overnight Call Rate target unchanged at 2.50% and did not signal additional monetary accommodation in the pipeline. RBA’s Stevens noted policy “remained appropriate” and added past monetary easing moves will continue to impact the economy, possibly decreasing the need for more policy action. The RBA news overshadowed Aussie data that saw July retail sales climb a lower than expected +0.1% m/m while the Q2 current account deficit expanded to –A$ 9.4 billion. Chinese Premier Li said China is concerned about capital outflows and PBoC indicated it will conduct reverse repos. Chinese data saw August non-manufacturing PMI recede to 53.9.

The British pound strengthened against most rivals through the European session as GBP/USD climbed to US$ 1.5601, EUR/GBP fell to £0.8445, GBP/JPY gained to ¥155.44, and GBP/CHF improved to CHF 1.4603. Sterling was bid higher on stronger than expected August construction PMI that reached 59.1 from 57.0 in July, the best index reading since September 2007. Also, BRC August sales came in lighter at +1.8% y/y and Halifax August house price numbers are due. BoE’s MPC will likely keep policy unchanged on Thursday following last month’s provision of forward guidance in which they confirmed they do not plan to hike interest rates until the unemployment level falls to the 7.0% level.

The Euro was knocked lower across the board through the European session as EUR/USD came off to US$ 1.3159, EUR/JPY weakened to ¥130.63, and EUR/CAD slumped to C$ 1.3871. Germany’s Merkel continues to defend EUR with verbal intervention and said Germany will not accept pooled Eurozone debt, adding she will reduce German unemployment further as she campaigns for re-election. Eurozone data today saw July PPI up +0.3% m/m and +0.2% y/y and many Eurozone service PMI numbers are due tomorrow. The ECB is expected to keep policy unchanged this week.

The Swiss franc was pressured against other currencies through the European session as USD/CHF climbed to CHF 0.9374 and CAD/CHF rallied to CHF 0.8891. CHF took some cues from assorted news that suggested missiles have been fired in the Mediterranean Sea. Swiss data saw Q2 GDP up +0.5% q/q and +2.5% y/y, above expectations. SNB’s Jordan defended the EUR/CHF 1.2 floor, indicating it is the right policy tool for stable prices while SNB’s Danthine pledged to keep CHF capped “as long as it corresponds to monetary conditions.” SNB predicts Swiss GDP growth of +1.0 to +1.5% in 2013 while the ECB expects Eurozone GDP will contract 0.6% this year.

The Japanese yen came off against all rivals through the European session with USD/JPY higher to ¥99.69, CAD/JPY better to ¥94.55, and NZD/JPY higher to ¥78.05. Japanese data saw the August monetary base climb 42.0% y/y to ¥177.0 trillion. Finance minister Aso said JPY weakness is a side effect of policies to end deflation. Economy minister Amari awaits upcoming Tankan data before deciding on a sales tax increase, a move that is supported by most sales tax panel members. Aso also noted the Japanese government may compile a supplementary budget if growth decelerates. BoJ’s balance sheet is now around ¥205.692 trillion, the first time it has eclipsed ¥200 trillion. BoJ is expected to keep policy unchanged this week.

Gold and Silver gained ground through the European session as Gold gained to US$ 1398.93 and was supported at $1384.41 while Silver appreciated to US$ 24.488 after finding support around US$ 23.986. Russian Defence Minister Shoigu was quoted as saying rockets had been fired from the central Mediterranean but this remains unconfirmed. Gold’s reaction to this headline risk underscores the metals complex’s sensitivity to geopolitical headline risk. Long Gold and Silver positions were up sharply over the past week.

Crude Oil was stronger through the European session as Brent futures reached US$ 114.25 and was supported at $112.70 while WTI futures gained ground to US$ 107.47 and found support at $106.28. News of the commencement of possible military action against Syria kept the Oil complex volatile today on jitters that crude exports could be hampered. It was also reported that Saudi Arabia will keep crude oil exports around 10 million barrels per day in September. Traders are carefully monitoring US politics as Obama has asked Congress for authority to launch military action against Syria.