The euro weakened vis-a-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4140 level and was capped around the $1.4200 figure. Traders do not expect the European Central Bank to change monetary policy tomorrow but will pay close attention to remarks from ECB President Trichet. Two key items that Trichet may comment on include the euro’s recent appreciation and its implications for actual intervention versus the heightened verbal intervention that European officials have been brandishing lately. Also, traders want to know if the ECB’s policy bias has shifted from hawkish closer to neutral on account of the recent turmoil in the financial markets. Any sense of hawkishness in Trichet’s remarks could easily see a strong bid in the market for the euro. In U.S. news, the September non-manufacturing ISM business index fell to 54.8 from 55.8 in August. The new orders index fell back while the prices index for service posted strong growth to 66.1. The greenback was pressured after ADP’s National Employment Report noted 58,000 private-sector jobs were added last month, up from a revised 27,000 in August. A significant amount of job losses were cited in the housing, construction, and financial services industries on account of the subprime mortgage meltdown in Q3. Similarly, the Challenger layoff report “pointed to a disturbing ramp up in financial services year-over-year layoffs.” Many economists are focusing on new jobs growth around 100,000 when the September non-farm payrolls report is released on Friday. In eurozone news, EMU-13 August retail sales were up +0.1% m/m and +1.0% y/y, weaker-than-expected, while the EMU-13 September services PMI survey fell back to 54.2 from 58.0 in August. Euro bids are cited around the US$ 1.4120/ 1.4055 levels.

The yen depreciated vis-a-vis the U.S. dollar today as the greenback tested offers around the 116.70 level and was supported around the 115.55 level. Stops were reached above the 116.55 level, representing the 50.0% retracement of the move from 109.00 to 124.15 as the greenback reached its strongest level since 27 August. Traders cited increasing risk appetite and a renewal of the short yen carry trade as two factors that led to intraday weakness in the yen. Traders await remarks from Bank of Japan Deputy Governor Iwata overnight. The Nikkei 225 stock index gained 0.90% to close at 17,199.89. Dollar bids are cited around the 114.80 level. The euro gained ground vis-a-vis the yen as the single currency tested offers around the 165.30 level and was supported around the 163.55 level. The British pound and Swiss franc gained ground vis-a-vis the yen as the crosses tested offers around the 237.80 and 235.85 levels, respectively. In Chinese news, traders are speculating the U.S. dollar could weaken soon and trade with a CNY 7.4 handle.

The British pound weakened vis-a-vis the U.S. dollar today as cable tested bids around the US$ 2.0340 level and was capped around the $ 2.0440 level. Sterling has moved lower for three consecutive days and traders are very curious to see how Bank of England Monetary Policy Committee’s interest rate decision materializes tomorrow. The central bank took the rare step of not changing rates at their September meeting and releasing a statement regarding their decision. The MPC is faced with the task of balancing concerns about inflationary pressures against growing signs the housing market and overall economy are cooling. Most traders do not expect the MPC will reduce interest rates tomorrow but could move closer to a neutral bias. Data released in the U.K. today saw the September services PMI survey fall to 56.7, its lowest print since August 2006. Also, the BRC September shop price index was up 0.2% m/m and 0.4% y/y. The three-month sterling Libor interbank rate scaled back to 6.24% today from 6.26% yesterday while the overnight fixing rate remained steady at 5.81%. Cable bids are cited around the US$ 2.0270 level. The euro moved higher vis-a-vis the British pound as the single currency tested offers around the ?0.6960 level and was supported around the 0.6930 level.

The Swiss lost ground vis-a-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1780 level and was supported around the CHF 1.1710 level. U.S. dollar offers are cited around the CHF 1.1825 level. The euro and British pound gained ground vis-a-vis the Swiss franc as the crosses tested offers around the CHF 1.6665 and CHF 2.4005 levels, respectively.