USD Ahead Early As CHF, NZD Slip - Metals, Oil Seek Direction

The Australian Dollar was mixed against major peers through the Asian session as AUD/USD came off to US$ 0.9412, EUR/AUD appreciated to A$ 1.4411, AUD/JPY climbed to ¥91.40, and AUD/CHF depreciated to CHF 0.8530. Data released in Australia today saw NAB September business confidence improve to +12 from the prior reading of +4 while NAB September business conditions improved to -4 from the prior reading of -7. Other data saw ANZ September job advertisements improve +0.2% m/m and from the prior reading of -2.0% m/m. Chinese data released today saw HSBC September services PMI tick lower to 52.4 from prior reading of 52.8. Major Australian banks are now predicting RBA will not ease monetary policy until February and May.

The Japanese yen depreciated against most major rivals through the Asian session as USD/JPY gained to ¥96.86, EUR/JPY appreciated to ¥131.44, GBP/JPY moved higher to ¥155.80, and CHF/JPY slumped to ¥106.87. Data released in Japan today saw the August trade balance improve to -¥885.9 billion from the prior reading of -¥943.3 billion while the August current account moderated to ¥161.5 billion from the prior reading of ¥577.3 billion. BoJ Governor Kuroda speaks twice in the US on Thursday at a major international monetary conference. Japan warned the US overnight about the US’s debt ceiling issue.

The British pound was mostly stronger against major currencies through the Asian session as GBP/USD fell to US$ 1.6075, EUR/GBP came off to £0.8432, GBP/CHF climbed to US$ 1.4541, and GBP/AUD improved to A$ 1.7081. Data released in the UK today saw BRC September like-for-like sales moderate to +0.7% y/y from the prior reading of +1.8% y/y, far below expectations, while the RICS September house price balance improved to 54% from the prior reading of 41%. BoE’s MPC releases its monetary policy decision on Thursday and is expected to keep policy unchanged. BoE Governor Carney has indicated the central bank does not plan to hike rates until the unemployment rate recedes and stabilises around 7.0%.

The U.S. Dollar appreciated against its peers through the Asian session as EUR/USD weakened to US$ 1.3563, USD/CHF gained to CHF 0.9041, USD/CAD bettered to C$ 1.0324, and NZD/USD fell to US$ 0.8268. G20 central bankers and finance ministers convene in the US this week and many speeches are expected on Thursday. A draft of the G20 communiqué indicates volatility related to QE withdrawal poses a significant risk, adding the global economic recovery remains fragile and uneven. The US government remains partially closed and Senate Democrats have reportedly prepared debt ceiling legislation that will permit Obama to raise the debt ceiling unless Congress blocks it. Treasury Secretary Lew is scheduled to testify on 10 October to the Senate Finance Committee on the debt ceiling limit. Yesterday’s auction of US Treasury Bills saw demand for 3-month Bills decline to 3.88 times, the lowest level since April 2010, while demand for 6-month Bills declined to 4.40 times, the lowest since April 2012. Dallas Fed President Fisher commented on the US’s fiscal position yesterday saying US companies face a “fog of uncertainty” regarding fiscal policy. Japan and China warned the US today as its largest creditors about its difficult fiscal position. Cleveland Fed’s Pianalto and Philadelphia Fed’s Plosser speak later today.

Gold and Silver moved higher through the Asian session as Gold climbed to US$ 1327.86 and was supported at $ 1320.60 while Silver appreciated to US$ 22.454 and was supported at US$ 22.204. Asian traders lifted the Metals complex following stark warnings from China and the US about the possibility of a US debt default. A decision by the Fed to taper QE3 policy will likely have a dampening impact on Gold and Silver as less speculative capital would be available in the capital markets. Central banks are expected to end Q4 having added about 350 tons of Gold bullion to their balance sheets this year, down from an estimated 535 tons in 2012, the most since 1964. Central banks and monetary authorities own an estimated 18% of the Gold that has ever been mined but have lost about US$ 545 billion in market value since Gold peaked in 2011. Along the same lines, the value of Gold exchange-traded products has declined about 43% in 2013.

Crude Oil was offered through the Asian session as Brent futures slumped to US$ 108.67 and were capped at $108.89 while WTI futures depreciated to US$ 102.80 and were capped at $103.82. Traders continue to shun crude Oil as the US gets closer to approaching its US$ 16.699 trillion debt ceiling on the premise the world’s largest consumer of Oil will consume and demand less crude energy. Oil prices also remain capped on account of the resumption of production in the US Gulf following the weakening of Tropical Storm Karen. Approximately 62% of Gulf oil production and 48% of natural gas output were shut as the storm approached but major producers have resumed operations. The ongoing political stalemate in the US is likely to keep energy prices capped as the shutdown of the US government results in less demand for crude products.