The euro appreciated vis-a-vis the U.S. dollar last week as the single currency tested offers around the $1.4965 level and was supported around the $1.4620 level. The pair gained about 175 pips last week. Treasury’s Paulson reiterated the U.S.’s strong dollar policy. Rumours surfaced that Saudi Arabia and UAE will revise their FX regimes by reducing USD exposure. The Fed saw the October rate cut as a “close call” and now sees core PCEs up 1.7 to 1.9% in 2008 and GDP growth between 1.80% and 2.5%. The euro neared the $1.50 figure on Friday and pulled away.

ECB’s Trichet and Liebscher noted exchange rate volatility is “not welcome” and cited
upside inflation risks. Buba sees German inflation normalizing in 2008. Eurogroup’s Juncker is “more concerned” about inflation and “deplores sudden changes” in exchange rates. ECB’s sees a slowdown more pronounced than expected.
Data released in the U.S. last week saw October single-family housing starts up 3.0% to 1.229 million; weekly initial jobless claims were off 11,000 to 330,000; the final November University of Michigan consumer sentiment index improved to 76.1; and October leading indicators fell 0.5%.
Data released in the eurozone last week saw September construction output unchanged m/m; the Belgian November consumer confidence index fell to -8; EMU-13 September industrial orders were off 1.6% m/m and up 2.0% y/y; German Q3 final GDP was up 0.7% q/q; EMU-13 October CPI was up 2.6% y/y; EMU-13 November PMI fell to 53.7; and German October import prices were up 0.7% m/m and 2.3% y/y.

The yen appreciated vis-a-vis the U.S. dollar last week as the greenback tested bids around the 107.55 level and was capped around the 111.05 level. The pair lost about 280 pips last week. The Nikkei 225 stock index closed at 14,888.77. Japan’s Tax Commission inched closer to lifting its consumption tax for the fiscal year to March 2009. BoJ’s Nakamura warned of a possible intensification of U.S. housing pressures and their impact on Japan.

Data released in Japan last week saw October department store sales off 1.4% y/y; the September all-industries index receded 1.6%; and the October merchandise trade surplus rose 66.1% to 1.019 trillion.

The Chinese yuan appreciated vis-a-vis the U.S. dollar last week as the greenback closed at CNY 7.4060 in the over-the-counter market, down from CNY 7.4258. China called a U.S. commission’s charge of currency manipulation “libelous.” Zhou said frequent rate moves are not needed and doesn’t see a rate hike this week. The G20 said the unwinding of global imbalances is a “shared responsibility.” China and the EU meet this week to discuss trade and the yuan. Bush administration officials visit China next month to discuss trade and the yuan.

The British pound appreciated vis-a-vis the U.S. dollar last week as cable tested offers around the US$ 2.0760 level and was supported around the $2.0450 level. The pair gained about 75 pips last week. MPC’s Blanchflower and Gieve voted for a November rate cut, upping the odds of easing. MPC’s Lomax reported the BoE “can and should respond quickly and flexibly to early signs of the changing economic weather.”
Data released in the U.K. last week saw CML October gross mortgage lending up 6% m/m; U.K. October money supply was up 0.1% m/m and 11.8% y/y; October PSNB worsened at -1.0 billion; BSA October mortgage approvals fell a record amount; CBI’s industrial trends survey saw the November industrial output balance ease to +9; Q3 business inventories were unchanged m/m and up 4.6% y/y; Q3 GDP was downwardly revised to 0.7% q/q and 3.2% y/y; and BBA October mortgage approvals reached a record low.

The Swiss franc appreciated vis-a-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.0885 level and was capped around the CHF 1.1200 figure. The pair lost about 155 pips last week.
Data released in Switzerland last week saw the October trade surplus rose 1.1% y/y to CHF 1.58 billion and Q3 employment was at 3.87 million, up 2.7% q/q.

The Canadian dollar depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the C$ 0.9925 level and was supported around the C$ 0.9705 level. The pair gained about 145 pips last week. BoC boss Dodge said global economic risks “clearly pose a risk that we are going to have to take into account when setting our own policy.” Incoming BoC Governor Carney testifies on 5 December.
Data released in Canada last week saw September wholesale sales up 1.1% m/m to C$ 43.7 billion; October core CPI was up 0.2% m/m and 1.8% y/y with headline CPI up 2.4% y/y; and September retail sales were off 0.2% m/m and up 0.1% ex-autos, and up 2.8% y/y.

The Australian dollar depreciated vis-a-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.8650 level and was capped around the US$ 0.8995 level. The pair lost about 150 pips last week.
Data released in Australia last week saw October merchandise imports rise to A$ 17.4 billion; the September Westpac leading index was up 1.9 points; and Q3 house prices rose q/q.