EURO

The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4725 level and was supported around the $1.4600 figure.  The common currency came within 25 pips of establishing a new lifetime high before paring intraday gains.  Many data were released in the U.S. today. First, September business inventories were up 0.4% while business sales were up 0.6%.  Second, October headline retail sales were up 0.2%, down from September’s +0.7% gain, and are up 5.2% y/y.  The ex-autos component was up 0.2% m/m and 5.2%  y/y. Third, October wholesale prices were up 0.1% while the core PPI rate was unchanged.  Notably, headline producer prices are up 6.1% over the past year, the largest change since September 2005, and core prices are up 2.5% y/y – the largest change since September 2005.  The big news in the U.S. today was an announcement from Fed Chairman Bernanke that the FOMC will provide four economic forecasts every year, up from the current two, and offer additional information in these forecasts to include overall inflation.  The time horizon in the Fed’s forecasts is being expanded to three years from two years and the first of these expanded forecasts will be released on 20 November.  Bernanke stated the Fed is trying to increase transparency.  The Fed also inched closer to adopting a formal inflation target by announcing it will publish forecasts on both headline and core inflation, as measured by personal consumption expenditures.  Bernanke confirmed the possible adoption of an inflation target in the future would focus on headline inflation whereas the Fed now focuses on core inflation that excludes volatile food and energy prices.  The Fed’s forecasts are now expected in February, April, July, and October.  Dallas Fed President Fisher hawkishly said the markets are “preoccupied with economic growth at the expense of doing our job on the inflation rate.” President Bush reiterated the U.S.’s strong dollar policy late in the North American session yesterday.  In eurozone news, EMU-13 GDP growth accelerated to 0.7% in Q3 from 0.3% in Q2 while German Q3 GDP expanded 0.7% in Q3, in-line with expectations.  ECB member Ordonez reiterated concerns with the effects of the global credit market turmoil.  Euro bids are cited around the US$ 1.4575/ 1.4470 levels.

¥/ CNY

The yen came off vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥111.75 level and was supported around the ¥110.75 level.  The yen was given today as traders did not liquidate many short yen carry trades in reaction to many news and economic data in the U.S., eurozone, and the U.K.  Intervention remains on traders’ radar screens following this weekend’s intervention warnings from Japanese Prime Minister Fukuda.  Most traders believe Bank of Japan’s Policy Board will not raise interest rates before the end of the year.  The Nikkei 225 stock index gained 2.47% to close at ¥15,499.56.  Dollar bids are cited around the ¥109.75 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥164.30 level and was supported around the ¥161.80 level.  The British pound came off vis-à-vis the yen as sterling tested bids around the ¥228.70 level while the Swiss franc appreciated vis-à-vis the yen and tested offers around the ¥99.75 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.4253 in the over-the-counter market, down from CNY 7.4335.  Data released in China today saw October retail sales up 18.1% y/y at CNY 826.3 billion and October property prices in 70 cities were up 9.5% y/y.  PBoC boss Zhou said monetary policy will be “stable and appropriately tight” to prevent the economy from overheating.

STERLING

The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 2.0550 level and was capped around the $2.0845 level.  Technically, today’s intraday high was right around the 23.6% retracement of the move from $1.9870 to $2.1160.  Sterling moved sharply lower after Bank of England released a relatively dovish quarterly inflation report that sees inflation remaining at its 2.0% target in two years’ time if interest rates decline. This report makes it clear the BoE intends to reduce interest rates over the coming months, though many traders do not believe the MPC will do so in December.  BoE Governor King admitted there is a growing dilemma on how to contend with a less benign outlook for growth and inflation after this summer’s credit crunch.  Data released in the U.K. today saw the October claimant count fall 9,000, the thirteenth consecutive monthly decline, and the claimant count unemployment rate remained low at 2.6%.  Also, average earnings in the three months to September accelerated to +4.1% from +3.7%  Cable bids are cited around the US$ 2.0515 level.  The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.7135 level and was supported around the ₤0.7040 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1175 level and was capped around the CHF 1.1275 level.  The pair established a new multi-year low before paring some intraday losses. U.S. dollar offers are cited around the CHF 1.1355 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6480 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 2.3075 level.