The euro appreciated vis-a-vis the U.S. dollar last week as the single currency tested offers around the $1.4240 level and was supported around the $1.4015 level. The pair gained about 40 pips last week. FOMC meeting minutes confirmed the Fed will be data-dependent but were less dovish than expected. Fed’s Yellen said the Fed may have been able to have move to a neutral bias. St. Louis Fed’s Poole said the September non-farm payrolls number hasn’t resulted in downside risk.

ECB’s Liikanen hawkishly called for “inflation expectations to remain anchored.” Germany’s Glos is worried by the “weak dollar…especially if it weakens further.” Italy’s Bini Smaghi noted “An exchange rate policy for the euro exists, and so does an institutional mechanism to enact it. However, to be effective, the impact on markets of monetary policy must be quick, sudden. To move, it's not necessary to wait for a G7 meeting.” Ecofin officials were subdued in noting with “great attention” the U.S.’s reaffirmation of its strong-dollar policy. Trichet called for a “common position” and “verbal discipline” on exchange rates and warned against “one-way bets.” ECB’s Juncker said the “historically high” euro could result in weaker growth in 2008. EU officials will meet Chinese counterparts in Lisbon on 28 November. Eurogroup’s Juncker said the euro’s strength “reflects that of our economy.” The ECB’s monthly bulletin said a pullback in corporate profits could presage slower economic growth. ECB’s Bini Smaghi said the G7 will solicit sub-prime exposure from banks. Garganas said inflation risks are “considerable” while Stark sees inflation “significantly above 2%” and Weber talked rates higher also.
Data released in the U.S. last week saw weekly initial jobless claims fall 12,000 to 308,000; continuing jobless claims were off 15,000 to 2.521 million; September import prices were up 1.0% m/m and 5.2% y/y; the U.S. August trade balance deficit shrank 2.4% y/ -US$ 57.59 billion; U.S. foreclosure filings nearly doubled y/y in September; September headline producer prices were up 1.1% m/m with core prices up 0.1% m/m and 2.0% y/y; September retail sales were up 0.6% with the ex-automobiles component up 0.4%; the mid-October University of Michigan consumer sentiment index fell to 82.0 from 83.4 in September; and the mid-October University of Michigan consumer sentiment index fell to 82.0.
Data released in the eurozone last week saw German manufacturing orders rise 1.2% m/m; German August industrial output was up 1.7% m/m; Q2 EMU-13 GDP was up 0.3% q/q and 2.5% y/y; German September wholesale price inflation was 0.9% m/m and 4.0% y/y; and EMU-13 industrial output was up 1.2% m/m and 4.3% y/y.

The yen depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the ?117.80 level and was supported around the ?116.80 level. The pair gained about 60 pips last week. The Nikkei 225 stock index closed the week at ?17,331.17. The BoJ voted 8-1 to keep the overnight call rate unchanged at 0.50%. Fukui said global uncertainty and U.S. downside risks are factors that have delayed a rate hike. BoJ’s monthly economic assessment was unchanged.
Data released in Japan last week saw the August value of industrial machinery orders fall 12.3% y/y; the September economy watchers’ current conditions index fell to 42.9 with the forward-looking index lower at 46.0; core private-sector machinery orders fell 7.7% m/m; bank lending was up 0.6% y/y; the September money supply was up 1.7% y/y; the August current account surplus was up 42.1% y/y; September consumer sentiment ticked up to 44.1 from 44.0 in August; September corporate bankruptcies were off 20.3% m/m; and the September domestic corporate goods price index was up 1.7% y/y, down from August’s 2.0% level.

The Chinese yuan depreciated vis-a-vis the U.S. dollar last week as the greenback closed at CNY 7.5110 in the over-the-counter market, up from CNY 7.5061. Deutsche Bank sees inflation stabilizing over the coming months. S&P sees 2007 GDP growth between 11% and 11.5%. A Chinese think tank sees 2007 CPI growth around 4.5%. U.S. Treasury’s Kimmitt called on the yuan to appreciate more quickly. Next week’s Communist Party Congress could see PBOC chief Zhou replaced.
Data released in China last week saw the CFLP September manufacturing PMI index rally to 56.1 from 54.0 in August; National Day retail sales reached CNY 350 billion; the Q3 business climate index was up 8.0 index points y/y; Q3 business confidence fell slightly to 143.0; Q3 consumer confidence was up 0.2% q/q ; the September M2 money supply was up 18.45% y/y; the September trade surplus narrowed to US$ 23.914 billion; and September actual foreign direct investment was off 2.36% y/y at US$ 5.27 billion.

The British pound depreciated vis-a-vis the U.S. dollar last week as cable tested bids around the US$ 2.0245 level and was capped around the $2.0475 level. The pair lost about 65 pips last week. The U.K. government offered a larger guarantee to Northern Rock depositors. BoE boss King was hawkish saying rates would not move lower just to bail out the financial markets and emphasized ongoing inflation risks. Darling’s pre-Budget report saw 2007 GDP growth between 2.0% and 2.5% and higher borrowing. M&A flows dented sterling last week.
Data released in the U.K. last week saw September input prices climb 3.2% m/m and were up 6.4% y/y; September core input prices were up 0.4% m/m and 3.3% y/y; September output prices were up 0.1% m/m and 2.7% y/y; August manufacturing output was up 0.4% m/m; BRC September like-for-like retail sales were up 3.0% y/y; NIESR reported GDP was up 0.7% in the three months to September; the U.K, goods in trade deficit narrowed to -?6.9 billion; and CML August mortgage lending was strong at ?34 billion; RICS reported a 14.6% balance in members who saw house prices fall in September compared with increases; and BCC’s manufacturing sector survey signaled activity remained healthy.

The Swiss franc depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.1895 level and was supported around the CHF 1.1760 level. The pair gained about 65 pips last week. UBS sees industrial growth strong in Q3 and Q4.
Data released in Switzerland last week saw September unemployment printed at 2.5%, down from August’s level of 2.6%.

The Canadian dollar appreciated vis-a-vis the U.S. dollar last week as the greenback tested bids around the C$ 0.9715 level and was capped around the C$ 0.9895 level. The pair lost about 85 pips last week. Treasury chief Costello said “All things considered, a strong currency - whilst tourists like it - is not all that good for your economy and it is not particularly good for your exports.”
Data released in Canada last week saw the September construction activity index rise 6.8 index points to 55.2; September ANZ job advertisements were off 0.4% m/m and up 33.1% y/y; new housing starts were up 16.6% to an annualized 278,000 new homes; the August new housing price index was up 0.4% m/m and 6.5% y/y; and the August merchandise trade surplus expanded to C$ 4.07 billion.

The Australian dollar appreciated vis-a-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.9060 level and was supported around the US$ 0.8910 level. The pair gained about 75 pips last week. Treasury chief Costello said “All things considered, a strong currency - whilst tourists like it - is not all that good for your economy and it is not particularly good for your exports.” Traders are talking parity even though the Aussie is ten big figures away from that level.
Data released in Australia last week saw the September construction activity index rise 6.8 index points to 55.2; September ANZ job advertisements were off 0.4% m/m and up 33.1% y/y; the September NAB business confidence index fell to its lowest level since January; October Westpac consumer sentiment was off 0.3%; August housing finance was up 1.6% m/m; and September unemployment fell to 4.2% from 4.3% in August.