JPY Flies High; EUR, CHF, USD Weak As Metals Lower, Oil Mixed

across the board through the European session as USD/JPY fell to ¥97.87, EUR/JPY came off to ¥129.59, GBP/JPY retreated to ¥151.90, and AUD/JPY crumpled to ¥87.48. A major round of Japanese numbers were released today including national July CPI which printed at +0.7%, its highest print since November 2009, while the July jobless rate ticked lower to 3.8%, its lowest level since October 2008.

Nomura/ JMMA manufacturing PMI improved to 52.2 in August and July household spending improved to +0.1%. The national ex-food and ex-energy core July CPI also improved to -0.1% y/y from -0.2%. Also, July industrial production figures strengthened to +3.2% m/m and +3.2% y/y and July annualised housing starts moderated to +12.0% y/y with July construction orders also softer to +13.7% y/y.

Today’s data will be seen as a win for Abenomics on account of growing inflationary pressures. Finance minister Aso called for a sales tax increase and warned fiscal reform could be in jeopardy otherwise and Economy minister Amari repeated Japan is exiting deflation.

The U.S. Dollar was weaker across the board through the European session as EUR/USD gained to US$ 1.3254, GBP/USD climbed to US$ 1.5527, and AUD/USD moved higher to US$ 0.8957. USD will take some cues today from the Syrian crisis where international support for military action is fading. USD is coming off the heels of strong economic data yesterday that saw Q2 GDP reach an annualised +2.5% rate, above the previous +1.7% print, and the GDP price index ticked higher to +0.8%.

Weekly initial jobless claims fell to +331,000 from the prior +337,000 level and continuing claims also moved lower. Richmond Fed’s Lacker spoke yesterday saying he “does not view tapering as cutting back on stimulus” and is eyeing average GDP growth around 2.0%. Many data due in the U.S. today include July personal income and spending, Chicago August PMI, July PCE, and August University of Michigan consumer sentiment.

The Euro was mostly lower against rivals through the European session as EUR/GBP fell to ¥0.8518, EUR/CHF weakened to CHF 1.2307, and EUR/AUD came off to A$ 1.4764. Mixed Eurozone data today saw German July retail sales print at -1.4% m/m and +2.3% y/y and Italian July unemployment ticked lower to +12.0%. Also, Eurozone August CPI fell to +1.3% from the prior reading of +1.6% with the core rate steady at +1.1%.

The July Eurozone unemployment rate was unchanged at +12.1% and improvements were registered in Eurozone services confidence, industrial confidence, and economic confidence for August. The ECB is also expected to announce a new 3-year LRTO repayment. ECB’s Nowotny reported there is still uncertainty in the periphery of the Eurozone. The ECB is not expected to change policy next week.

The Swiss franc was mostly bid against peers through the European session as CHF/JPY came off to ¥ 105.22, GBP/CHF fell to CHF 1.4417, and AUD/CHF depreciated to CHF 0.8285. Today’s data saw the KOF August leading indicator improve to +1.36 from the prior reading of +1.25, exceeding expectations.

The British pound was mixed against other currencies through the European session as GBP/AUD escalated higher to A$ 1.7408 and GBP/CAD slumped to C$ 1.6325. The big news in the UK is a lack of legislative support behind PM Cameron for a Syrian military response, the first time in at least 150 years a UK PM has lost a parliamentary vote on military action. BoE Governor Carney reiterated an increase in rates will follow the economic recovery but added the BoE could ease further if required. Despite Carney’s ongoing support for the BoE’s new forward guidance, the markets are currently pricing in +150bps of rate hikes and are far ahead of the BoE on the forwards curve. Carney called for an “exception degree of stimulus,” called for more business investment, and is watching the housing market. Today’s UK data saw Nationwide house prices up +0.6% m/m and +3.5% y/y and July mortgage approvals improved to 60,600 while July net consumer credit gained.

Gold and Silver were pushed lower through the European session as Gold fell to US$ 1394.55 after being capped at $1411.23 while Silver fell to US$ 23.431 after finding resistance around US$ 24.014. Following Cameron’s legislative defeat regarding military action against Syria, metals came off on the idea that any U.S. military action will likely be unilateral. Gold has fallen about 16% this year and 27% from its peak two years ago with much of the decline linked to the Fed’s likely QE taper, likely beginning in about three weeks. Physical demand from China and India is expected to remain strong.

Crude Oil gained significant ground through the European session as Brent futures climbed to US$ 114.25 after finding demand at $112.62 and WTI futures gained to US$ 107.84 and were supported at $106.45. Following Cameron’s parliamentary defeat on U.K. military action, Egypt reported it is closing the Suez Canal to all US military ships on account of its defence pact with Syria. US’s Obama appears to be boxed in and has stated he has not decided on a course of action in Syria despite evidence the Assad regime used chemical weapons against citizens. Secretary of Defence Hagal has said the US will not act without allies.