Market Drivers for September 9th, 2013
Japanese GDP grows at 3.6% annual rate, Tokyo get 2020 Olympics
Euro Sentix highest since May 2011
Nikkei 2.48% Europe -.09%
Oil $110/bbl
Gold $1386/oz.

Europe and Asia:
AUD ANZ Job Adverts -2.0% vs. -1.1%
AUD Home Loans 2.4% vs. 2.2%
CNY Trade Balance 28.5B vs. 20.3B
EUR Sentix Sentiment 6.5 vs. -4.0
CHF Unemployment rate 3.2% vs. 3.2%
CHF Retail Sales 0.8% vs. 3.2%

North America:
CAD Building Permits 8:30
USD Consumer Credit 15:00

Dollar continued to drift lower at the start of week’s trade as the high beta currencies were boosted by the a smattering of eco and M&A news while USD/JPY gave up a big part of its early gains. USD/JPY initially soared on the double whammy of positive news as Tokyo won the bid to host 2020 Olympics and Japanese GDP rose at an impressive 3.6% annual rate.

The pair soared to a high of 100.11 as the positive sentiment on risk-on flows helped to fuel the rally. However, the move quickly fizzled as attention turned back to the issue of the increase in national sales tax which is expected to be raised to 8%. Today’s Parliamentary panel on the sales tax issue showed that lawmakers offered no objections with LPD’s Noda and Miyazawa stating that on one on the panel urged a rethink of the policy.

The market will now await the final decision of PM Abe on whether to proceed with the hike, which is expected to be announced at the start of October after the results of the Tankan survey. More than any other Japanese policy official, Mr. Abe has been reluctant to enact the sales hike proposal fearful of the idea that it will dampen the just recovering consumer demand.

Indeed while today’s Japanese GDP data showed an impressive increase of 3.6% annual growth – the gains were spurred by capital investment while consumer sentiment as measured by the Eco Watchers survey actually declined a bit to 51.2 from 52.3 the month prior. Although Abenomics has certainly had positive impact in reviving the Japanese economy, there is a very real danger that the combination of a sales tax hike and slowing global growth could undo much of the recent gains.

Elsewhere, the euro strengthened towards the 1.3200 figure after the Sentix investor survey rose to 6.5 from -4.0 eyed – its best reading since May 2011. Cable also moved higher, boosted by the M&A flows from the Suntory-GSK deal while Aussie cleared 9200 handle after good Chinese Trade data over the week-end and the solid Home Loan data. The win of the right leaning Liberal party over the weekend was also seen as a positive step, with new Prime Minister Tony Abbott vowing to roll back the mining and carbon tax.

With no data on the US calendar, trading may remain quiet as markets continue to speculate on the twin dominant themes of Syria and Fed taper. But with no major announcement from either Washington or New York expected today, price action is likely to remain muted.

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