Dollar Weakest Against All Major Currencies

against most rivals through the European session as USD/JPY came off to ¥99.52, EUR/JPY weakened to ¥130.63, GBP/JPY slumped to ¥155.62, and CHF/JPY fell to ¥105.42. Traders piled into JPY ahead of USD NFP data today. Japanese data saw the July coincident index improve to 106.4 while the July leading index gained to 107.8. The Japanese government reported JPY’s share of global FX activity has increased. BoJ’s monthly economic report indicated the Japanese economy is “expected to continue a moderate recovery.”

The U.S. Dollar was weakest against all major currencies through the European session as EUR/USD appreciated to US$ 1.3137, GBP/USD rallied to US$ 1.5612, USD/CHF came off to CHF 0.9431, and NZD gained to US$ 0.7938. All eyes are on August non-farm payrolls with a print around +180,000 expected and some major desks eyeing prints as high as 200,000. The unemployment rate is forecast to remain around +7.4%. Today’s data may go a long way to cementing the market’s expectations regarding a possible QE taper by the FOMC in mid-September. These data series may begin to become more volatile as many workers’ statuses are changed ahead of the launch of Obamacare in October. Fed official George is scheduled to speak later during the North American session.

The Euro depreciated against most currency peers through the European session as EUR/GBP tested £0.8407, EUR/CHF fell to CHF 1.2380, and EUR/CAD reached C$ 1.3725. As expected, ECB kept its main overnight call rate target unchanged at +0.50% yesterday. ECB President Draghi continues to remain quite dovish in remarks, yesterday reporting “underlying price pressures in the euro area are expected to remain subdued over the medium term.” Today’s Eurozone data saw German July trade shrink to EUR 16.1 billion from the prior reading of EUR 17.0 billion as July exports came in at -1.1% m/m and July imports climbed +0.5% m/m. German Q2 labour costs printed at +0.0% q/q and these data indicate there may be some softness in the German economy in the run-up to Merkel’s re-election bid later this month. German July industrial production is due later today. Moody’s lifted Germany’s banking outlook to ‘stable’ from ‘negative.’

The Australian Dollar was weak against most major rivals through the European session as AUD/USD climbed to US$ 0.9147, EUR/AUD came off to A$ 1.4348, and GBP/AUD slumped to A$ 1.7042. Aussie data released today saw the August performance of construction index fall to 43.7 from the prior reading of 44.1 and Australian foreign reserves climbed to A$ 55.7 billion in August. China’s Xi reported at the G-20 that China will increase exchange rate reform and will consider reforms at the expense of economic growth. PBoC Governor Zhou is confident China can manage the impact of the Fed’s exit from QE.

The British pound was pressured against most currencies through the European session as GBP/CAD fell to C$ 1.6310 and GBP/NZD weakened to NZ$ 1.9635. As expected, BoE’s MPC voted to keep its asset purchase program unchanged at £375 billion yesterday. The markets and BoE remain at odds, however, about interest rate expectations with the markets speculating the BoE will ignore its current forward guidance and lift rates by the end of 2014. In contrast, BoE in August reported it will not lift rates until the unemployment rate is stable around 7.0% and economists do not anticipate this before Q3 2016. Today’s UK data saw Halifax August house prices soften to +0.4% m/m from the prior reading of +0.9% m/m and climb to +5.4% (3M/y/y) from +4.6% (3M/y/y).

The Swiss franc turned in a mixed performance against rivals through the European session as AUD/CHF climbed to CHF 0.8636 and NZD/CHF gained to CHF 0.7497. Today’s Swiss data saw August foreign currency reserves decline marginally to CHF 434.2 billion from the prior reading of CHF 434.3 billion, suggesting SNB did not intervene much last month. August CPI printed at -0.1% m/m and unchanged y/y while EU-harmonised CPI ticked lower to +0.4% y/y. These data indicate that some deflationary headwinds remain evident in the Swiss economy. Q2 industrial production numbers are also expected today.

Gold and Silver gained marginally through the European session as Gold climbed to US$ 1373.97 and was supported at $1365.78 while Silver gained to US$ 23.369 and was supported at US$ 23.069. Today’s minor gains have followed significant selling pressure over the last several sessions. The metals complex remains relatively weak on account of ongoing uncertainty regarding military action against Syria. It now appears Obama may lack ample support in the US Congress when legislators reconvene on 9 September to approve a limited military campaign against Syrian chemical weapons facilities. Gold and Silver are down from recent highs of US$1433 and $25.10, respectively. New data out of China indicate China is likely to overtake India as the top consumer of bullion in 2013.

Crude Oil was weaker through the European session as Brent futures reached US$ 113.48 and were capped at $113.74 while WTI futures slumped to US$ 107.64 and were capped at $108.16. Traders carefully monitored developments in St. Petersburg where fireworks between Obama and host Putin at the G-20 were seemingly avoided. US stockpiles of crude at Cushing, Oklahoma were reduced to their lowest level in eighteen months. Prices of Brent crude may be more sensitive to Syrian developments because the Middle East accounted for about 35% of global oil production in Q1.