EURO
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4255 level and was supported around the $1.4135 level. The common currency finished the week on a positive note, reclaiming one big figure and pulling within 45 pips of a new multi-month high. The pair moved higher after the release of the German July Ifo busienss climate index that improved for a fourth consecutive month and at a nine-month high, printing at 87.3. Also, the EMU-16 July provisional composite Purchasing Manager’s index was up more than expected at 46.8, representing the slowest pace of contraction in nearly one year. Collectively, these data suggest business confidence and manufacturing are both on the mend. In contrast, a new European Union poll is reporting most Europeans believe the worst of the recession is still ahead. European Central Bank member Gonzalez Paramo reported current fiscal policies are not sustainable and said the ECB must communicate its exit strategies from the ongoing monetary stimuli it is providing to the economy. Additionally, Gonzalez Paramo sees more credit easing ahead. ECB member Orphanides reported the eurozone will experience a gradual economic recovery in 2010. ECB member Nowotny said the economic outlook has improved in the past few months but added it is “still too early” to talk about recovery. In U.S. news, the final July University of Michigan consumer sentiment indicator retreated to 66.0, from 70.8 in June and 64.6 in mid-July. Federal Reserve Chairman Bernanke reiterated the U.S. is “winding down” emergency programs while Treasury Secretary Geithner defended the U.S.’s sweeping reforms. Data to be released on Monday include June new home sales and the Dallas Fed’s manufacturing activity index. Euro bids are cited around the US$ 1.3435 level.
JPY / CNY
The yen appreciated marginally vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥94.60 level and was capped around the ¥95.15 level. Finance minister Yosano reported a rebound in exports is “good news” as the Japanese economy begins to recover from its recession. It was reported yesterday that June exports were up 1.1% m/m, a welcome improvement considering Japan’s declining trade balance has led to lower overall economic growth. The government also reported there are signs of economic recovery but added rising unemployment could cap the improvement. The political drama in Japan is in full swing ahead of the mandatory general election in September. Prime Minister Aso and his Liberal Democratic Party are in extreme danger of losing the election to the left-leaning Democratic Party of Japan. Data from the U.S. Commodity Futures Trading Commission confirmed that futures traders increased their bets that the yen will appreciated vis-à-vis the U.S. dollar. The Nikkei 225 stock index climbed 1.55% to close at ¥9,944.55. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥135.20 level and was supported around the ¥133.85 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥155.35 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.85 level. In Chinese news, the U.S. dollar lost ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8284 in the over-the-counter market, down from CNY 6.8300.
STERLING
The British pound lost ground vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6390 level and was capped around the $1.6540 level. Cable managed to finish the week on a positive note but was off from intraweek highs that saw it pull to within 160 pips of multi-month highs. Data released in the U.K. today saw second quarter gross domestic product decline 0.8%, much more than expected, and was off 5.6% y/y – the largest annual decline since at least 1955. Prime Minister Brown reported global banks have been stabilized but added there is not yet a global strategy for a return to full growth. Bank of England Monetary Policy Committee member Sentance optimistically said the decline in Q2 economic growth precedes “evidence of positive growth in the second half of the year.” Cable bids are cited around the US$ 1.6185 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8675 level and was supported around the ₤0.8575 level.
