President Obama’s request that congress delay a vote to authorize the US to use military force in Syria drove overnight activity. For the moment it seems that the Russian authored diplomatic solution of Syria turning over its chemical weapons has for the time being worked, thereby easing some of the tension being felt around the world. Looking forward, this becomes a matter of how quickly must the plan play out before Obama loses his patience and reopens the possibility of surgical military strikes.
Events surrounding Syria relaxed investor sentiment and fostered risk appetite overnight, causing the Japanese Yen to slip again. The USDJPY touched new multi-month highs again overnight and is eyeing multi-year highs in the mid-103 area. Given what is happening in the American bond market right now the outlook for this pair is constructive, many large banks are calling for a move to 105.00 by the end of the 2013.
With investors less worried about geopolitical tensions overnight, the subject of yields and the hunt for it pushed its way to the front of the line overnight. This lent support to the Australian and New Zealand Dollars, both of which found good demand at recent highs versus the greenback. The Kiwi traded up to the mid 0.8000 handle, running into resistance at its 200-Day Moving Average, meanwhile the AUD held its ground near multi-month highs around 0.9300. This region has thwarted AUDUSD rallies all summer, however with the spotlight temporarily off of the Reserve Bank of Australia and sentiment more constructive, a breach would be a big win for the Aussie, and set the stage for gains up into the mid-nineties. The AUD & NZD also held recent gains overnight against the Euro and the Japanese Yen as trading favored yields.
Subsiding Syria tensions and limited meaningful data released overnight, led equities to trade with a more quiet tone. Asian Bourses were mixed, major indices generally finished close to where they started the day; the big winner being the Australian ASX, which put on 0.64%. In Europe equities were similarly mixed, the FTSE in the UK advancing the most at 0.89% on the back of better than expected employment numbers.
The August Claimant Count, which measures the number of persons receiving unemployment benefits in the UK contracted 32.6k, besting expectation of only 22k fewer people claiming benefits. This helped bring the unemployment rate down to 7.7% from 7.8% in July. Bank of England head Mark Carney previously mentioned that once the unemployment rate reached 7.0% he would revisit the suitability of current levels of stimulus. The overnight data put the Sterling on the offensive, especially versus the Greenback, against which it reached its strongest value since February. The EURGBP also plunged to lows not seen since January as the common currency conceded ground to the Pound.
As the American session warms up today, the USDCAD is holding court near its lows from yesterday as sentiment favors the Loonie. There is no meaningful American or Canadian data today, so it looks like there will be limited action in the pair today. Tomorrow has the weeklyThursday Unemployment special, which can usually be relied on for a little bit of excitement. However Friday will be the really exciting day. American PPI, Retail Sales, and Consumer Sentiment all slated for release. Given the near 200-pip move lower in this pair over the last week, plus the prospect of Tapering on the horizon, those buying USD might think about taking some risk off of the table ahead of Friday’s data.
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