JPY Strong While EUR Weakens And Metals And Crude Fade

The Japanese yen outperformed against all major rivals through the European session as the USD/JPY fell to ¥97.67, EUR/JPY weakened to ¥131.73, GBP/JPY came off to ¥157.67, and CHF/JPY fell to ¥107.74. Traders await Q3 Tankan data tomorrow along with August employment and household spending numbers. PM Abe will tomorrow reveal his decision about an increase in the national sales tax to 8% and is expected to unveil a ¥5 trillion supplementary budget. BoJ’s policy decision is expected on Friday. Today’s Japanese data saw September PMI rally to 52.5 from the prior reading of 52.2 while August industrial production printed at -0.7% m/m and -0.2% y/y. Also, August large retailers’ sales improved to -0.1% and August retail trade printed at +0.9% m/m. Additionally, August housing starts were up +8.8% y/y to 960,000 and August construction orders came in at +21.4% y/y.

The Australian dollar notched a mix performance against major rivals through the European session as the AUD/USD bettered to US$ 0.9334, AUD/JPY came off to ¥90.72, AUD/CHF gained to CHF 0.8450, and the AUD/CAD rallied to C$ 0.9618. The RBA is expected to keep its benchmark rate unchanged at 2.50% when its decision is announced tomorrow despite the weakening Australian economy. August retail sales numbers are expected to be released tomorrow. Data released today saw TD Securities September inflation print at +0.2% m/m and +2.1% y/y while August private sector credit growth came in at +0.3% m/m and +3.4% y/y. Today’s Chinese data saw the August leading index tick lower to 99.86 while the HSBC September manufacturing PMI ticked higher to 50.2, but fell short of expectations.

The New Zealand dollar depreciated against most currencies through the European session as the NZD/USD came off to US$ 0.8249, EUR/NZD slumped to NZ$ 1.6285, NZD/JPY weakened to ¥80.66, and AUD/NZD rallied to NZ$ 1.1276. New RBNZ lending restrictions take effect from tomorrow in the real estate sector to try and avert a housing market bubble. PM Key reported RBNZ is likely to tighten policy more slowly on account of the new lending restrictions, adding the markets are expecting an average 2014 unemployment rate around 5.6%. Today’s data saw August building permits up 1.4% m/m while NBNZ September business confidence improved to 54.1 and the ANZ September activity outlook improved to 45.3. Also, the M3 money supply expanded 6.5% y/y.

The euro depreciated against most major currencies through the European session as the EUR/USD gained to US$ 1.3476, EUR/GBP weakened to £0.8339, EUR/CHF came off to CHF 1.2214, and EUR/AUD slumped to A$ 1.4457. The EUR gapped lower about 30 pips against the US dollar at the weekly open after Italy’s Letta coalition government fell apart on account of resignations from Berlusconi allies. The Euro was also pressured lower on weaker-than-expected September headline CPI that ticked lower to +1.1% y/y from the prior reading of +1.3%, and a core rate of +1.0% y/y. These data evidence a lack of price pressures in the Eurozone, and will keep traders squarely focused on the prospect of additional LTROs by the ECB. Other data saw German August retail sales growth of +0.5% m/m and +0.3% y/y. The Eurozone August unemployment rate is expected to print around +12.1% tomorrow. The EUR net long positions were reported this weekend near a 28-month high.

The British pound was mixed against major currencies through the European session as the GBP/USD appreciated to US$ 1.6180, GBP/CHF dropped to CHF 1.4608, GBP/AUD fell to A$ 1.7294, and GBP/CAD improved to C$ 1.6687. Today’s UK data saw the September Hometrack housing survey come in at +0.5% m/m and +2.4% y/y. Also, UK August mortgage approvals came in at 62,200 while August net consumer credit printed at £600 million and the August M4 money supply was up +0.7% m/m and +2.1% y/y with net lending secured on dwellings at £1.0 billion. Traders await remarks from BoE officials this week.

Gold and Silver weakened through the European session as Gold fell to US$ 1335.21 and was capped at $ 1347.61 while Silver depreciated to US$ 21.596 and was capped at US$ 21.956. Gold gapped higher by about US$ 5 at the open and Silver gapped higher by about US$ 0.10 on increasing expectations the US government will shut down tomorrow due to a budget impasse that looks unlikely to be resolved by the first day of the new fiscal year. House Republicans have voted to defund Obamacare and Obama has stated he will not negotiate this point with Republican lawmakers. PBoC reported that it plans to ease import and export restrictions on Gold. The CFTC reported net long positions in Gold jumped 12% to 78,654 futures and options in the week that ended 24 September, the most since 27 August. Gold is on track to notch a quarterly gain of about 9.5% despite a year-to-date decline of about 27% in bullion holdings in ETPs.

Crude Oil was better through the European session as Brent futures weakened to US$ 106.86 and were capped at $107.46 while WTI futures slumped to US$ 101.23 and were capped at $102.27. Brent futures gapped lower by about US$ 0.50 at the weekly open on the increasing likelihood the US government will shut tomorrow for the first time in seventeen years, potentially reducing demand for Oil. Crude is also lower on reports that Obama and Iranian President Rouhani spoke by telephone on 27 September regarding Iran’s nuclear weapons program and the UN Security Council’s plan to eliminate Syria’s chemical weapons. Net long positions in WTI fell 2.1% to 275,098 futures and options, the lowest level since 2 July.