JPY Sails, AUD And NZD Fall Back

The Japanese yen outperformed against all major rivals through the European session as USD/JPY fell to ¥99.03, EUR/JPY weakened to ¥132.97, GBP/JPY came off to ¥158.24, and CHF/JPY fell to ¥108.36. JPY advanced on data that saw August headline CPI print at +0.9% y/y, its strongest print since November 2008 and the latest indication that Abenomics is creating some inflation. Tokyo September CPI remained steady at +0.5% y/y. Nikkei reported Japan will seek a supplementary budget of ¥5 trillion for the current fiscal year to provide additional stimulus. PM Abe is expected to announce supplementary budget details on 1 October along with his decision on increasing the national sales tax. Yen portfolio flows data through 20 September saw Japanese investors decrease exposure to foreign bonds and foreign equities while foreign investors dumped Japanese bonds and increased purchases of Japanese equities. Finance minister Aso also reiterated a cut in the corporate sales tax rate is being considered.

The Euro turned in a mixed performance against major currencies through the European session as EUR/USD gained to US$ 1.3505, EUR/GBP weakened to £0.8359, EUR/CHF came off to CHF 1.2260, and EUR/AUD gained to A$ 1.4471. Eurozone data saw French Q2 GDP print at +0.5% q/q and +0.4% y/y while German September CPI prints from four German states revealed a range of increases between +1.1% y/y and +1.5% y/y. Other Eurozone data saw steady-to-better September consumer, economic, industrial, and services confidence. Italian September economic sentiment increased to 83.3 from 82.0 in August and September business confidence improved to 96.6. ECB member Coeure reported ECB’s forward guidance was in response to a steepening yield curve and is designed to reduce volatility.

The British pound was mostly better against major currencies through the European session as GBP/USD appreciated to US$ 1.6131, GBP/CHF dropped to CHF 1.4592, GBP/AUD rocketed to A$ 1.7245, and GBP/CAD improved to C$ 1.6629. BoE Governor Carney was quoted as saying the economic recovery has “strengthened and broadened” and added he does not support additional QE at this time. UK data saw September GfK consumer confidence improve to -10 from the previous print of -13, the highest level since November 2007. Other data saw September Nationwide house prices up +0.9% m/m and +5.0% y/ while the Lloyds July business barometer improved to +57.

The U.S. Dollar was mixed against most rivals through the European session as USD/CHF fell to CHF 0.9078, AUD/USD depreciated to CHF 0.9325, USD/CAD gained to C$ 1.0324, and NZD/USD advanced to US$ 0.8318. Kansas City Fed’s George reported the Fed should shift its policy to “more normal conditions” because job gains demand reduced QE measures, adding a delay in QE tapering could threaten FOMC credibility and reported “fiscal drag” has impaired U.S. growth in 2013. George also indicated she advocates a US$ 15 billion taper to start because inflation expectations are “pretty well anchored.” Senate Majority Leader Reid plans a procedural vote today on a bill to continue government funding through 15 November. Yesterday’s US data saw Q2 GDP up an annualised +2.5% while weekly initial jobless claims moved lower to +305,000 and August pending homes sales came in at -1.6% m/m and +2.9% y/y. Today’s data include August PCE, August personal income and spending, and final September University of Michigan consumer sentiment numbers. Fed officials speaking today include Rosengren, Evans, and Dudley.

Gold and Silver were marginally weaker through the European session as Gold fell to US$ 1319.71 and was capped at $ 1328.04 while Silver depreciated to US$ 21.510 and was capped at US$ 21.744. Improving U.S. economic data have contributed to ongoing weakness in the Metals complex on the premise the Fed may pare back its US$ 85 billion in stimulus per month. Metals prices are also taking cues from the budget showdown in the U.S. where a budget for the 2014 fiscal year has not been passed and the U.S. is on schedule to breach the debt ceiling by 17 October. Platinum prices have fallen to their lowest level since July.

Crude Oil was better through the European session as Brent futures weakened to US$ 108.19 and were capped at $108.59 while WTI futures slumped to US$ 102.25 and were capped at $102.67. The UN Security Council is nearing a vote on a resolution to eliminate Syria’s chemical weapons program, and Oil has been weak on the notion that reduced military tensions could result in little or no supply disruptions. U.S. and Iranian negotiators are also said to be discussing an agreement regarding the latter’s nuclear program within the next year.