EURO
The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4455 level and was capped around the $1.4605 level. Technically, today’s intraday low was right around the 76.4% retracement of the move from $1.4310 to $1.4920. The common currency continues to weaken on the premise the European Central Bank will be forced to shift its monetary policy bias this year from hawkish to neutral or dovish. Less-than-hawkish remarks from ECB member Mersch last week added to this view. The euro will likely continue to weaken as eurozone economic data continue to soften. German data released today saw December PPI fall 0.1% m/m, below forecasts for a 0.2% rise. ECB member Quaden today said the ECB is displeased with the current level of inflation but sees inflation receding to below 2.0% in 2009. In U.S. news, liquidity was reduced during the North American session today on account of the U.S. market holiday. Traders await existing home sales data on Thursday. Some economists are skeptical that the US$ 145 billion fiscal stimulus announced by the Bush administration last week can move through a Democratic-controlled Congress or will be sufficient to help the U.S. avert recession. Euro bids are cited around the US$ 1.4355 level.
JPN/CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥105.65 level and was capped around the ¥106.95 level. The pair reached its lowest level since May 2005. Bank of Japan’s Policy Board began its two-day policy deliberations today and is expected to keep the overnight call rate unchanged at 0.50%. Most traders believe the BoJ may reduce its GDP growth forecast for the current fiscal year to March 2008 from 1.8% to as low as 1.3%. Data released in Japan overnight saw the November index of leading economic indicators upwardly revised to 18.2 from 10.0 while the coincident index was downwardly revised to 30.0. The Nikkei 225 stock index lost 3.86% to close at ¥13,325.94. Dollar bids are cited around the ¥104.20 level. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥152.80 level and was capped around the ¥156.10 level. The British pound and Swiss franc depreciated vis-à-vis the yen as the crosses tested bids around the ¥205.65 and ¥95.75 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.2365 in the over-the-counter market, down from CNY 7.2418. Data released in China overnight saw the unemployment rate fall to 4.0% at the end of 2007.
STERLING
The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9450 level and was capped around the $1.9580 level. Cable reached its lowest level since March 2007. Data released in the U.K. today saw the December M4 money supply accelerate to an annualized 12.3% from 11.7% in November while December public sector net borrowing printed at £7.8 billion, its largest December deficit on record. Also, BSA reported December mortgage approvals slumped and CML noted December mortgage lending fell to its lowest level since the middle of 2005. Moreover, January Rightmove house prices dropped 0.8% m/m. Traders are also paying close attention to the situation involving troubled U.K. lender Northern Rock Plc. The British government today said it favours a private-sector buyout of the bank. Cable bids are cited around the US$ 1.9260 level. The euro weakened vis-à-vis the British pound as the single currency tested bids around the £0.7420 level and was capped around the £0.7460 level.
SWISS
The Swiss franc depreciated sharply vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1100 figure and was supported around the CHF 1.0990 level. Data released in Switzerland today saw December producer and import prices increase 3.0% y/y and were up 2.6% for all of 2007 – the highest increase since 2000. U.S. dollar offers are cited around the CHF 1.1155 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5945 level while the British pound appreciated vis-à-vis the Swiss franc and tested offers around the CHF 2.1580 level.