USD Lower, AUD And NZD Sail While Metals Gap Up

through the European session as EUR/USD gained to US$ 1.3354, USD/JPY slumped to ¥98.44, GBP/USD improved to US$ 1.5956, and USD/CHF weakened to CHF 0.9232. USD started off weaker on news that Summers withdrew his name from consideration for Fed Chairman, and perceived dove Vice Chair Yellen is seen as Bernanke’s likely successor. The FOMC is expected to taper QE this week by about US$ 10 billion monthly, most probably by purchasing fewer Treasuries, with a US$ 15 billion monthly reduction not unforeseen. Bernanke’s post-FOMC presser will be of great interest to see if additional QE exit timing is revealed. August industrial production and capacity utilisation data are due today with August CPI numbers expected tomorrow.

The Australian Dollar gained across the board through the European session as AUD/USD appreciated to US$ 0.9391, EUR/AUD came off to A$ 1.4250, AUD/JPY rallied to ¥92.75, and GBP/AUD was knocked lower to A$ 1.6981. US’s weekend confirmation that it had agreed to the Russian-led initiative to disarm Syria’s chemical weapons program saw risk trades reestablished today. Also, the notion that a Yellen-led Fed may result in USD weakness prompted higher-yielders like AUD to rise. Minutes from RBA’s policy decision are expected tomorrow. The markets await Chinese FDI numbers, most likely expected today. The IMF reported Chinese GDP growth is focused on “unsustainable” credit creation.

The British pound was mixed against rival currencies through the European session as GBP/USD bettered to US$ 1.5956, GBP/JPY strengthened to ¥157.92, and GBP/CAD fell back to C$ 1.6419. Sterling had a difficult time against some higher-yielding currencies. UK data saw Rightmove September house prices print at -1.5% m/m and +4.5% y/y. Data due tomorrow include August CPI, PPI, and DCLG July house price numbers and minutes from BoE MPC’s September rate decision are due on Wednesday.

The New Zealand Dollar was mostly stronger against its peers through the European session as NZD/USD escalated to US$ 0.8226, EUR/NZD fell to NZ$ 1.6238, NZD/JPY climbed to ¥81.22, and AUD/NZD strengthened to NZ$ 0.7603. NZD gained ground on news that Summers had withdrawn his name from consideration to succeed Bernanke. Kiwi data saw REINZ August house prices climb 8.5% y/y, down from the prior 14.7% y/y, while the August house price index was up 2.1% m/m. RBNZ will implement new lending restrictions from 1 October in a bid to slow speculative elements in the real estate complex. Other data saw Q3 Westpac NZ consumer confidence pull back to 115.4 while the August performance services index moved lower to 53.2 from the prior 58.2 print. Q2 GDP numbers are due on Thursday.

The Euro was weaker against most other currencies through the European session as EUR/GBP fell to £0.8371, EUR/CHF came off to CHF 1.2336, and EUR/CAD slumped to C$ 1.3748. ECB rate-setter Mersch said the ECB will not raise interest rates anytime soon and added Europe is lagging the global economic recovery cycle. Mersch also called for additional structural reforms to extend the Eurozone’s economic recovery and called on countries to adopt stronger fiscal regulations. ECB’s Praet characterised Europe’s recovery as weak and reiterated monetary policy shall remain accommodative. ECB boss Draghi speaks later today in Berlin. August CPI numbers are due today and are not expected to evidence any heating up of inflationary pressures in the Eurozone. Traders await a vote in the Italian Senate on Berlusconi’s expulsion on Wednesday, a move that may engender event risk for EUR.

Gold and Silver gapped higher but then fell through the European session as Gold weakened to US$ 1323.36 and was capped at $1335.09 while Silver depreciated to US$ 21.997 and was capped at US$ 22.423. The Metals complex was lifted on speculation that a Yellen-led Fed would lead to a slower tightening of the US interest rate complex, thereby creating additional liquidity for riskier assets such as Gold. News that the US and Russia agreed to secure Syria’s chemical weapons by mid-2014 with inspections beginning in November kept a lid on the complex. US, UK, and French foreign ministers convene in Paris today. Weekly CFTC positioning data saw Gold net long positions decline 16% to 84,929 futures and options in the week ending 10 September, with short positions up 9.8%.

Crude Oil gapped lower and extended losses through the European session as Brent futures fell to US$ 110.32 and were capped at $110.68 while WTI futures weakened to US$ 106.23 and were capped at $106.98. News of a US and Russian agreement to dismantle Syria’s chemical weapons program and dovish remarks from Obama pressured Oil lower. Weekly CFTC positioning data saw long positions on crude Oil decline 5.2% to 209,058 contracts, the lowest level since 9 July. Crude may take some cues today from the expected release of a UN report on the chemical weapons attack in Syria on 21 August.