The euro depreciated vis-a-vis the U.S. dollar last week as the single currency tested bids around the $1.4630 level and was capped around the $1.4910 level. The pair lost about 205 pips last week. Early U.S. holiday retail sales look to be fairly robust. Fed’s Kohn cited “elevated turbulence” from the credit shock and said policymaking must be “flexible, pragmatic, and nimble.” Philly Fed’s Plosser hawkishly said lowering rates won’t solve the markets’ problems. The Fed’s Beige Book cited decelerating GDP growth, “relatively soft retail spending,” and a “quite depressed” real estate sector. Fed boss Bernanke said the Fed is “exceptionally alert and flexible” and sees headwinds for consumers.

Market chatter suggests EMU-13 GDP growth may slow in 2008. ECB’s Ordonez sees GDP growth as having peaked. Germany’s export association is halving 2008 GDP growth forecasts. Germany sees 2008 growth around 2.0%. ECB’s Papademos sees slower growth and higher inflation. ECB’s Tumpel-Gugerell sees 2008 GDP growth around 2%. ECB’s Quaden sees policymaking as being “data-dependent.” ECB’s Stark seeks “solid” growth and higher inflation risks. ECB’s Bini Smaghi said the ECB favours a “strong euro.” ECB’s Garganas said the euro’s recent moves have been “sharp and abrupt.” Buba sees 2007 and 2008 GDP growth around 2.5% and 2.0%, respectively. ECB’s Liebscher sees upside risks prevailing.
Data released in the U.S. last week saw the Chicago Fed’s National Activity Index fall to -0.73; November consumer confidence worsened to 87.3; October new durable goods orders fell 0.4% and the non-defense capital goods ex-aircraft component was off 2.3%; October existing home sales were off 1.2% m/m; October building permits were downwardly revised to -7.2%; Q3 GDP were upwardly revised to 4.9%; weekly initial jobless claims were up 23,000 to 352,000; October existing home sales were up 1.7% and down 23.5% y/y; October construction spending was off 0.8%; October private spending was off 0.8%; Chicago November PMI improved to 52.9 with the prices paid component up; October consumer spending was up 0.2%; October personal incomes were up 0.2%; and core PCE were up 0.2% and 1.9% y/y.
Data released in the eurozone last week saw German November CPI was up 3.0% y/y; the German November Ifo business climate index improved to 104.2; the German GfK climate index fell to 4.3 in November; EMU-13 money supply growth accelerated to 12.3%; German October wholesale sales were up 0.6% m/m and 1.8% y/y; Q3 EMU-13 GDP was up an annualized 2.7%; and EMU-13 November provisional HICP was up 3.0%.

The yen depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the 111.20 level and was supported around the 107.20 level. The pair gained about 290 pips last week. The government downgraded its assessment of employment for the first time in three years and sees U.S. sub-prime risk as being the largest risk to the economy. The Nikkei 225 stock index closed at 15,680.67.

Data released in Japan last week saw the October corporate services price index increase 1.4% y/y; October retail sales were up 0.8% y/y; October industrial output was up 1.6% m/m; October core CPI was up 0.1% y/y; October all-household spending was up 0.6% y/y; October orders received by 50 largest contractors were off 22.7% y/y; October consumer sentiment worsened; October housing starts fell 35%; and October unemployment was unchanged at 4.0%.
The Chinese yuan appreciated vis-a-vis the U.S. dollar last week as the greenback closed at CNY 7.4000 in the over-the-counter market, down from CNY 7.4060. The pair is now printing with a CNY 7.3 handle. EU officials met with China and “share a common diagnosis” the euro is too strong vis-a-vis the yuan. China Investment Corp may take Abu Dhabi’s lead and work to “stabilize” the U.S. economy. China’s end-October FX reserves were US$ 1.455 trillion. French President Sarkozy visited China and announced US$ 30 billion in new trade deals.

Data released in China last week saw October urban fixed-asset investment up 30.7%.

The British pound depreciated vis-a-vis the U.S. dollar last week as cable tested bids around the US$ 2.0530 level and was capped around the $2.0830 level. The pair lost about 60 pips last week. BoE’s Bean said rates may have to remain higher “for a while.” MPC’s Barker said the BoE is “super alert” to changes in economic conditions while MPC’s Sentance cited “upside inflationary risks from oil and other commodity prices.” BoE’s King says the economic outlook is “rather uncomfortable and highly uncertain.” MPC’s Blanchflower sees more credit turmoil.

Data released in the U.K. last week saw Hometrack November house prices off 0.2% m/m and up an annualized 3.6%; Land Registry house prices in England and Wales fell 0.1% m/m; November house prices were off 0.8% m/m; November mortgage approvals fell to 88,000; CBI’s distributive trades balance improved to +13 in November; U.K. November consumer confidence fell to its weakest level since March 2003; and median pay settlements were up 3.5% in the three months to November.

The Swiss franc depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.1325 level and was supported around the CHF 1.0955 level. The pair gained about 300 pips last week. SNB’s Hildebrand sees credit market fallout limited to “only large financial institutions.”
Data released in Switzerland last week saw October producer and import prices up 0.2% m/m and 2.7% y/y; the UBS October private consumption index improved to 2.23 from 2.01; the November KOF economic barometer fell to 2.02 from 2.04 in October; November CPI was up 0.5% m/m and 1.8% y/y; and Q3 GDP was up 0.8% m/m and 2.9% y/y.

The Canadian dollar depreciated vis-a-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0015 level and was supported around the C$ 0.9800 level. The pair gained about 100 pips last week. Traders are increasingly speculating Bank of Canada will reduce interest rates this week.
Data released in Canada last week saw Canadian weekly earnings up 0.3% m/ and 3.2% y/y; September new and renewed unemployment claims were up 2.6% m/m and off 5.8% y/y; and Q3 GDP was up 0.7% q/q and 2.9% y/y.

The Australian dollar appreciated vis-a-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.8920 level and was supported around the US$ 0.8670 level. The pair gained about 65 pips last week. Australia’s Labour Party swept to power.
Data released in Australia last week saw Q3 building activity was up +4.0% q/q; November skilled vacancies were up +0.6% m/m; Q3 capital expenditures were off 6.5%; October private sector credit was up 1.0% m/m; and the Q3 current account deficit reached –A$ 15.9 billion.