The euro strengthened vis-a-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3640 level and was supported around the $1.3555 level. Technically, today’s intraday low was right around the 50% retracement of the move from $1.3260 to $1.3850. Data released in the U.S. today saw May new orders for durable goods climb 5.9% with the ex-transportation component up 3.7%, well above expectations. Also, core capital goods orders ex-defense and ex-aircraft were up 2.2%. Other data released today saw July new homes sales up +2.8%, positive data that may help to assuage some fears regarding the condition housing market credit crunch. Moreover, July building permits were upwardly revised to -1.7% from -2.8%. Traders are still monitoring job losses that have resulted from the recent mortgage liquidity crisis in the U.S. and these job losses should be reflected in August’s non-farm payrolls report. In eurozone news, French President Sarkozy pressured the European Central Bank saying “credit must not be tightened again” and referred to the Federal Reserve’s recent reduction in the discount rate. Data released in the eurozone today saw the manufacturing PMI survey fall to 54.2 from 54.9 in July while the services PMI fell to 57.9 from 58.3. Euro bids are cited around the US$ 1.3545 level.

The yen appreciated vis-a-vis the U.S. dollar today as the greenback tested bids around the ?115.50 level and was capped around the ?116.50 level. Technically, today’s intraday high was right around the 38.2% retracement of the move from ?124.15 to ?111.60. Data released in Japan overnight saw the July corporate services price index rise 0.1% m/m and 1.6% y/y, the fastest pace in fifteen years. These data will provide Bank of Japan with more justification for its next interest rate increase. Most traders believe the central bank will lift the overnight call rate by +25bps in September or October to +0.75%. Policymakers voted yesterday to not raise rates this month and cited global credit conditions as the reason for their delay in shifting policy. The Nikkei 225 stock index lost 0.41% to close at ?16,248.97. Dollar bids are cited around the ?114.55 level. The euro moved higher vis-a-vis the yen as the single currency tested offers around the ?158.30 level and was supported around the ?156.60 level. The British pound came off vis-a-vis the yen as sterling tested bids around the ?230.85 level while the Swiss franc moved higher vis-a-vis the yen and tested offers around the ?96.70 level. The Chinese yuan appreciated sharply vis-a-vis the U.S. dollar as the greenback closed at CNY 7.5666 in the over-the-counter market, down from CNY 7.5870.

The British pound moved higher vis-a-vis the U.S. dollar today as cable tested offers around the US$ 2.0115 level and was supported around the $1.9980 level. Data released in the U.K. today saw Q2 GDP expand +0.8% q/q and +3.0% y/y, unchanged from preliminary data. Other data released today saw Hometrack August house prices remain unchanged while London house prices declined for the first time in one year. Most traders believe Bank of England’s Monetary Policy Committee will lift the repo rate by +25bps to 6.00% later this year. Cable bids are cited around the US$ 1.9915 level. The euro moved higher vis-a-vis the British pound as the single currency tested offers around the ?0.6795 level and was supported around the ?0.6760 level.

The Swiss franc appreciated vis-a-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1990 level and was capped around the CHF 1.2075 level. Dollar offers are cited around the CHF 1.2120 level. The euro gained ground vis-a-vis the Swiss franc as the single currency tested offers around the CHF 1.6390 level while the British pound came off vis-a-vis the Swiss franc and tested bids around the CHF 2.4045 level.