JPY Weakens, AUD And USD Rally

The Australian Dollar was bid higher against major peers through the European session as AUD/USD expanded to US$ 0.9454, EUR/AUD depreciated to A$ 1.4364, AUD/JPY climbed to ¥91.94, and AUD/CHF appreciated to CHF 0.8555. Data released in Australia today saw Westpac October confidence decline 2.1% to 108.3. October consumer inflation expectations will be released tomorrow along with September employment numbers and a mountain of Chinese September data including foreign loans, foreign reserves, and money supply. Traders expect RBA to ease monetary policy further with initial benchmark rate cuts expected in Q1.

The Japanese yen depreciated against major rivals through the European session as USD/JPY gained to ¥97.46, EUR/JPY appreciated to ¥132.17, GBP/JPY moved higher to ¥156.54, and CHF/JPY rallied to ¥107.52. BoJ Deputy Governor Nakaso indicated there is a strong possibility the BoJ will reach its 2% inflation target in FY 2014-2015, adding Japanese long-term yields remain very stable. Nakaso also indicated there is no need for additional easing at this time. BoJ Governor Kuroda will provide two major speeches in the US this week. Former Abe advisor Hamada said the BoJ must be ready to act as a prolonged US stimulus could lead to additional JPY strength and weaken the Japanese economy. Data released in Japan today saw September preliminary machine tool orders at -6.3% y/y, down from the prior reading of -1.7% y/y.

The British pound was mixed against major currencies through the European session as GBP/USD fell to US$ 1.6051, EUR/GBP came off to £0.8434, GBP/CHF climbed to US$ 1.4569, and GBP/AUD slumped to A$ 1.7017. Data released in the UK today saw the September BRC shop price index improve to -0.2% m/m from the prior reading of -0.5% y/y. Other data to be released today include August industrial production, the August trade balance, and August manufacturing production. Also, the NIESR September GDP estimate will be released during the North American session. BoE’s MPC will release its interest rate decision tomorrow and is expected to keep policy unchanged.

The U.S. Dollar searched for direction against its peers through the European session as EUR/USD weakened to US$ 1.3544, USD/CHF gained to CHF 0.9074, USD/CAD bettered to C$ 1.0377, and NZD/USD fell to US$ 0.8271. President Obama is expected to officially nominate Fed Vice Chairman Yellen to succeed Chairman Bernanke today and risk assets are expected to find a bid on the premise that a Yellen-led Fed will seek to reduce the unemployment rate more aggressively than it will counter inflation. US interest rates have inverted on the short-end of the curve with 1-month Treasury bill yields around 0.32% and 6-month yields around 0.08%, an indication of the market’s concern with the ongoing budget stalemate and pending breach of the US debt ceiling. US Treasury officials countered China’s and Japan’s warnings about a possible US debt default by calling on China to liberalise CNY more and calling on Japan to not target exchange rates. G20 central bankers and finance ministers convene in Washington, D.C. on Thursday. Minutes from the FOMC’s September policy deliberations will be released today.

Gold and Silver were sideways through the European session as Gold climbed to US$ 1321.53 and was supported at $ 1316.46 while Silver appreciated to US$ 22.385 and was supported at US$ 22.200. The Metals complex awaits cues from the ongoing US government closure, negotiations regarding a possible increase in the debt ceiling, and Obama’s nomination of Yellen to head the Fed. Gold assets held in the SPDR Gold Trust, the largest ETP backed by Gold Bullion, fell to 898.18 metric tons yesterday, the least since February 2009. Gold will also take cues from the release of FOMC meeting minutes today.

Crude Oil was mixed through the European session as Brent futures slumped to US$ 109.18 and were capped at $109.49 while WTI futures appreciated to US$ 103.52 and were supported at $103.19. WTI gained on news that Senate Democrats are planning a test vote before the weekend on a measure that would provide Obama to raise the US$ 16.7 trillion debt ceiling for about a year unless two-thirds of the entire Congress disapproves. House Speaker Boehner continues to call for immediate negotiations with Obama. API reported US crude inventories climbed 2.8 million barrels last week and an EIA report today is also expected to evidence an increase in stockpiles. EIA yesterday raised its WTI forecast for 2013 to 90.26 million barrels per day at an average 2013 price of US$ 98.69.