The euro depreciated vis-a-vis the U.S. dollar last week as the single currency tested bids around the $1.4520 level and was capped around the $1.4725 level. The pair lost about 40 pips last week. Bernanke boosted Fed transparency by increasing the number of economic forecasts published by the Fed to four from two and will increase the time horizon to three years from two years. Also, the Fed will publish forecasts for headline and core inflation, inching closer to the adoption of a formal inflation target. Dallas Fed’s Fisher said markets are “preoccupied with economic growth at the expense of doing our job on the inflation rate.” Bush reiterated the strong U.S. dollar policy. Fed’s Kroszner sees more “downbeat” data but doesn’t know if rates should come down further. KC Fed’s Hoenig sees GDP growth around 2.0% next year.

Germany’s finance ministry said there are “no grounds for concern” over the euro. ECB’s 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.” The ECB’s reiterated it “stands ready to control growing inflation risks.” Germany’s DIW raises its Q4 and 2007 GDP forecasts.
Data released in the U.S. last week saw September existing home sales reach an all-time low; September business inventories were up 0.4%; September business sales were up 0.6%; October headline retail sales were up 0.2%, down from +0.7%, and up 5.2% y/y; October ex-autos retail sales were up 0.2% m/m and 5.2% y/y; October wholesale prices were up 0.1% with the core PPI rate unchanged m/m; headline PPI is up 6.1% y/y and core PPI is up 2.5% y/y; October headline consumer price inflation rise 0.3% m/m and 3.5% y/y; October core CPI was up 0.2% m/m and 2.2% y/y; weekly initial jobless claims were up 20,000 to 339,000; the NYFRB’s Empire State manufacturing index fell to 27.37; TICS total net capital was –US$ 14.7 billion in September with long-term capital at US$ 5.8 billion and actual net foreign capital at US$ 26.4 billion; October industrial production was off 0.5%; and October capacity utilization was off 0.5% to 81.7%.
Data released in the eurozone last week saw the November ZEW expectations index decline to a 15-year low of -32.5 from -18.1; French October CPI accelerated 0.2% m/m and 2.0% y/y; EMU-13 September industrial output was off 0.7% m/m and up 3.5% y/y; EMU-13 GDP accelerated to 0.7% in Q3 from 0.3%; EMU-13 harmonized CPI printed at 2.6%; German October final CPI was up 0.2% m/m and 2.4% y/y; and the EMU-13 trade surplus widened to €3.1 billion.

The yen depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the ?111.75 level and was supported around the ?109.10 level. The pair gained about 40 pips last week. The Nikkei 225 stock index closed at ?15,154.61. Risk aversion returned to the market leading to yen strength. BoJ’s Policy Board voted 8-1 to keep the overnight call rate unchanged at 0.5%. Fukui referenced the U.S. housing market’s correction in his justification. The BoJ’s monthly economic assessment was unchanged. PM Fukuda warned the yen is appreciating “too fast” and warned of intervention if speculators are not “careful.” Asian currencies are likely to be mentioned at this weekend’s G20 meeting in South Africa.

Data released in Japan last week saw October consumer confidence fall to 42.8; the October domestic corporate goods price index rose +2.4% y/y; the September current account surplus expanded 40.4% y/y; Q3 GDP expanded 0.6% q/q; the September tertiary index declined 1.6% m/m; the September leading economic indicator printed at +0; and the September coincident index was revised to +60.0.

The Chinese yuan depreciated vis-a-vis the U.S. dollar last week as the greenback closed at CNY 7.4258 in the over-the-counter market, up from CNY 7.4108. A government think tank sees Q4 GDP up 11.2% with CPI at 5.9%. PBoC is expected to tighten policy before the end of the year and Zhou said monetary policy will be “stable and appropriately tight.” PBOC’s Yi Gang said an undervalued yuan “is not in the interest of China.”

Data released in China last week saw the October trade surplus climb 13.5% y/y to US$ 27.05 billion; October producer price inflation gained 3.2% y/y; October CPI was up 6.5% y/y; October retail sales were up 18.1% y/y at CNY 826.3 billion; October property prices in 70 cities were up 9.5% y/y; October wholesale prices were up 6.5% y/y; industrial value-added output was up 18.5% y/y; and fixed-asset investment was up 29.6% in the January-October period.

The British pound depreciated vis-a-vis the U.S. dollar last week as cable tested bids around the US$ 2.0350 level and was capped around the $2.0870 level. The pair lost about 355 pips last week. Traders’ BoE rate outlook changed after the release of torrid October PPI with many dealers now not expecting a December rate cut. BoE’s quarterly inflation report was dovish and sees inflation at 2.0% in two years if rates move to 5.1% as the market expects. Nationwide sees U.K. house price inflation at 0% in November 2008. Funding stresses remain in the U.K. banking sector with the three-month Libor rate around 6.40% and overnight rate around 5.86%.

Data released in the U.K. last week saw October PPI up 3.8%; the government’s September annual house price inflation eased to 10.8% from 11.4% in August; October CPI was up 2.1% y/y; the October RICS house price balance fell to -22.2%; CML September mortgage lending fell to ?30.6 billion with home purchase loans lower; the October claimant count fell 9,000 and the unemployment rate remained at 2.6%; average earnings in the three months to September accelerated to +4.1% from +3.7%; and October retail sales were off 0.1% m/m and up 4.4% y/y.

The Swiss franc appreciated vis-a-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.1160 level and was capped around the CHF 1.1300 figure. The pair lost about 50 pips last week. SNB’s Roth sees “problems” if the franc continues to weaken vis-a-vis the euro and sees higher inflation and lower growth risks.

Data released in Switzerland last week saw the November ZEW economic expectations indicator fall 12.9 to -28.9 and September retail sales were up 3.0% y/y.

The Canadian dollar depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the C$ 0.9885 level and was supported around the C$ 0.9430 level. The pair gained about 285 pips last week. BoC Senior Deputy Governor Jenkins reported “With the rapid and significant fall in the value of the U.S. dollar, there is increased risk of disorderly adjustment to global imbalances, including the increased risk of rising protectionist sentiment. Given the recent, rapid rise of the Canadian dollar, Canada is bearing a disproportionate share of the adjustment.”

Data released in Canada last week saw October leading indicators up 0.1% m/m; October manufacturing sales were off 0.9% m/m; and September manufacturing shipments were off 0.9% m/m.

The Australian dollar depreciated vis-a-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.875 level and was capped around the US$ 0.9085 level. The pair lost about 230 pips last week. RBA’s Monetary Policy Report foresees Q4 inflation above target around 3.25% y/y.

Data released in Australia last week saw the October NAB business confidence index improve +2 points to +9; the Q3 wage index was up 1.0% q/q; and the November consumer sentiment index was up 4.2% m/m.