Weak USD Keeps Gold Near a Weekly High

Weak USD Keeps Gold Near a Weekly High

Weak USD Keeps Gold Near a Weekly High

Asian equities saw little in the way of direction overnight with gains in the Nikkei 225 capped by comments from Japanese PM Adviser Hamada

• AUD/USD reclaimed 0.7600 after the RBA stood pat on rates as expected before pulling back amid downbeat comments on inflation

• Looking ahead, highlights include German Factory Orders, EU GDP, US Composite and Services PMIs and US ISM Non-Manufacturing PMI

Asia

Asia equity markets traded mixed with US markets shut for Labor Day. Nikkei 225 (+0.2%) was modestly higher with a softer JPY supporting the index, while ASX 200 (-0.4%) was negative as participants anticipated the RBA to remain unchanged at today’s policy meeting. Shanghai Comp (Unch.) and Hang Seng (+0.2%) were subdued amid a lack of news-flow, while the PBoC also kept its liquidity injections to a near-minimum.

Japanese PM Abe Adviser Hamada stated the BoJ should wait for the Fed before taking next steps as the BoJ risks having efforts overshadowed if it expands easing in September and Fed maintains rates a few hours later. Hamada added that a Fed hike would have more impact on weakening JPY than anything the BoJ does alone and that there is still an opportunity to expand easing in November and December.

PBoC set the mid-point at 6.6676 (Prev. 6.6873) and injected CNY 20bln via 7-day reverse repos and CNY 10bln in 14-day reverse repos

Europe

DBRS affirmed Ireland at A, trend stable.

United Kingdom

UK BRC Retail Sales Like-For-Like (Aug) Y/Y -0.90% vs. Exp. 1.40% (Prev. 1.10%)

FX

AUD/USD outperformed ahead of the RBA meeting with the pair reclaiming 0.7600 as markets priced-in expectations for a pause. This supported related crosses with AUD/NZD and AUD/JPY breaking above 1.0400 and 79.00 respectively, while the decision itself was relatively uneventful and saw a mild pullback in AUD as RBA remained downbeat on inflation. USD/JPY and JPY crosses gained overnight as they found reprieve from yesterday’s Kuroda-induced pressure, before later comments from PM Adviser Hamada forced a pull back from highs as he stated that the BoJ should wait for the Fed before acting.

RBA kept the Cash Rate Target unchanged at 1.50% as expected. RBA stated that recent data suggests overall growth continues despite a fall in business investment, adding that inflation is still quite low and is expected to remain low for quite some time.

Commodities

WTI Crude futures saw uneventful overnight trade with prices holding on to gains seen yesterday after reports that Saudi and Russia agreed to coordinate on stabilizing oil markets. Gold was relatively flat with a weaker USD keeping the precious metal near a weekly high and also supporting copper prices.

South Africa’s AMCU stated it failed to reach an agreement on workers’ pay as part of negotiations with Anglo-American, impala and Lonmin.

United States

US markets were closed yesterday for the Labor Day Holiday.

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