The euro weakened vis-a-vis the U.S. dollar today as the single currency tested bids around the US $1.4605 level and was capped around the $1.4700 figure. The common currency consolidated some of yesterday’s gains Data released in the U.S. today saw October headline consumer price inflation rise 0.3% m/m and 3.5% y/y, unchanged from September’s +0.3% gain, while core prices were up +0.2% m/m and +2.2% y/y. These data suggest that the spike seen in yesterday’s October PPI data have not yet transmitted through to the consumer price chain, and may afford the FOMC some room to ease monetary policy next month and possibly again in January, especially if the recent spike in energy prices does not result in significant inflation gains. The y/y core print of 2.2% is above the Fed’s perceived comfort zone, but the FOMC focus on core personal consumption expenditures. Other data released today saw weekly initial jobless claims rise 20,000 to 339,000 while continuing jobless claims fell 7,000 to 2.568 million. Also, the New York Fed’s Empire State manufacturing index saw current conditions fall slightly to 27.37 from a revised 28.75 in October. In eurozone news, ECB member Stark said the central bank does not want “abrupt changes” in the euro’s exchange rate and said EMU-13 inflation risks “appear to have increased and intensified recently.” Stark added the ECB is ready to act in a “firm and timely manner.” The ECB’s November monthly bulletin was released today and indicated it “stands ready to control growing inflation risks.” Data released in the eurozone today saw EMU-13 harmonized consumer price inflation at 2.6%, significantly above the ECB’s 2.0% target rate. Also, German October final consumer price inflation was up 0.2% m/m and 2.4% y/y. Germany’s DIW institute raised its Q4 GDP growth forecast to 0.6% and now sees 2007 growth around 2.7%. Euro bids are cited around the US$ 1.4575/ 1.4470 levels.

The yen appreciated vis-a-vis the U.S. dollar today as the greenback tested bids around the 110.35 level and was capped around the 111.70 level. Technically, today’s intraday high was right around the 23.6% retracement of the move from 124.15 to 109.10. Data released in Japan overnight saw the September tertiary index decline 1.6% m/m. BoJ Governor Fukui spoke overnight and cited “…downside risks stemming from the US subprime mortgage problem and the resulting volatility in the global financial markets. The recent disruptions in global financial markets seem to show that under the continuing favorable conditions of healthy world growth and low inflation, financial imbalances can accumulate, which will be followed by corrections posing a risk to economic stability. The current situation of the world economy, where low inflation coexists with high economic growth, seems favorable for central banks. However, it is a regrettable truth that the job of central banks never gets easier, only more challenging.” Most traders believe Fukui will not be able to orchestrate a rate hike in Japan before he leaves office around the end of the current fiscal year in March. The Nikkei 225 stock index lost 0.67% to close at 15,396.30. Dollar bids are cited around the 109.75 level. The euro came off vis-a-vis the yen as the single currency tested bids around the 161.35 level and was capped around the 163.75 level. The British pound and Swiss franc weakened vis-a-vis the yen as the crosses tested bids around the 225.60 and 98.10 levels, respectively. The Chinese yuan appreciated vis-a-vis the U.S. dollar as the greenback closed at CNY 7.4228 in the over-the-counter market, down from CNY 7.4253. Data released in China today saw October wholesale prices up 6.5% y/y, an acceleration from September’s 6.2% level, while industrial value-added output was up 18.5% y/y between January and October. PBoC’s Yi Gang reported an undervalued yuan is “not in the interest of China.” Most traders believe China will tighten monetary policy before the end of the year.

The British pound moved lower vis-a-vis the U.S. dollar today as cable tested bids around the US$ 2.0420 level and was capped around the $2.0615 level. Technically, today’s intraday low was just above the 50% retracement of the move from $1.9650 to $2.1160. Data released in the U.K. today saw October retail sales reach a nine-month low, off 0.1% m/m and up 4.4% y/y. U.K. financial institutions continue to be challenged by funding concerns. Today’s retail sales data follows yesterday’s dovish Bank of England quarterly inflation report and the markets are now speculating the central bank will need to move interest rates lower, possibly as early as next month. The monetary outlook in the U.K. is diverging from the monetary outlook in the eurozone where the ECB clearly remains hawkish. Cable bids are cited around the US$ 2.0365 level. The euro moved higher vis-a-vis the British pound as the single currency tested offers around the 0.7165 level and was supported around the ?0.7120 level.

The Swiss franc depreciated marginally vis-a-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1200 figure and was capped around the CHF 1.1260 level. Data released in Switzerland today saw the ZEW economic expectations indicator fall 12.9 points to -28.9 in November from -16.0 in October. U.S. dollar offers are cited around the CHF 1.1355 level. The euro and British pound slumped vis-a-vis the Swiss franc as the crosses tested bids around the CHF 1.6425 and CHF 2.2930 levels, respectively.

The Australian dollar came off vis-a-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8880 level and was capped around the $0.9015 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from $0.7675 to $0.9400. Australian dollar bids are cited around the US$ 0.8535 level. The New Zealand dollar moved lower vis-a-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.7545 level and was capped around the $0.7660 level. Data released in New Zealand today saw Q3 retail sales rise 0.2% q/q. New Zealand dollar bids are cited around the US$ 0.7415 level.

The Canadian dollar weakened vis-a-vis the U.S. dollar today as the greenback tested offers around the US$ 0.9785 level and was supported around the $0.9605 level. Data released in Canada today saw October manufacturing sales off 0.9% m/m and September manufacturing shipments were off 0.9% m/m. U.S. dollar offers are cited around the $0.9960 level.