The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4660 level and was capped around the $1.4755 level. Stops were hit below the $1.4700 figure, representing the 23.6% retracement of the run-up from $1.4310 to $1.4825. G10 central banks convened in Basel today and ECB’s Trichet said global economic growth remains “quite robust” but cited some downside risks including elevated commodity, food, and oil prices. Trichet reiterated there is no room for “complacency” against inflation and said there is “danger of second-round effects on headline inflation.” Data released in the eurozone today saw the EMU-13 economic sentiment indicator fall to 104.7 in December from 104.8 in November, above forecasts. Most traders expect the ECB to keep rates unchanged on Thursday and maintain a hawkish bias, especially ahead of IG Metall wage negotiations. Also, November EMU-13 producer prices rose 0.8% m/m and 4.1% y/y, above expectations, while EMU-13 November unemployment was unchanged at 7.2%. In U.S. news, Fed Vice Chairman Kohn said there the saturation of information the Fed is providing the markets leads to “diverse” views and has disappointed those who are looking for “unambiguous guidance” from the Fed. The fed funds futures market is currently pricing in about a 65% chance the Federal Open Market Committee will ease rates by 50bps at the end of the month. Euro bids are cited around the US$ 1.4465 level.

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.70 level and was supported around the ¥108.45 level. Technically, today’s intraday high was just above the 23.6% retracement of the move from ¥114.65 to ¥107.85. Data released in Japan overnight saw the December monetary base up 0.4% y/y. Bank of Japan is expected to keep the overnight call rate unchanged at 0.5% when policymakers convene in a couple of weeks. The central bank, however, is expected to downwardly revise GDP forecasts to around 1.3% for the current fiscal year. Bank lending and an economic survey will be released in Japan on Friday. The Nikkei 225 stock index lost 1.30% to close at ¥14,500.55. Dollar bids are cited around the ¥107.20 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥160.95 level and was supported around the ¥159.90 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥216.15 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥97.60 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.2690 in the over-the-counter market, down from CNY 7.2732, the pair’s lowest close since the yuan revaluation of July 2005. PBoC Governor Zhou said the yuan’s recent appreciation represents “feedback of economic data statistics” including China’s trade surplus, rising inflation, and the high price of oil.

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9650 level and was capped around the $1.9755 level. Technically, today’s intraday low was right around the 76.4% retracement of the move from $1.9170 to $2.1160. Traders await Thursday’s interest rate decision from Bank of England’s Monetary Policy Committee. One school of thought suggests MPC policymakers will cut the repo rate by 25bps while another school of thought believes MPC officials will not cut now but look to cut in Q1. A CBI financial services sector survey reported the U.K. financial services sector decelerated in Q4. Prime Minister Brown called for renewed discipline on wage negotiations. Tomorrow’s BRC retail sales monitor will offer clues about the U.K. holiday shopping period. Cable bids are cited around the US$ 1.9590 level. The euro appreciated vis-à-vis the British pound as the single currency tested offers around the ₤0.7480 level and was supported around the ₤0.7440 level.

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1190 level and was supported around the CHF 1.1065 level. Stops were hit above the CHF 1.1155 level, representing the 23.6% retracement of the move from CHF 1.1595 to CHF 1.1020. Data released in Switzerland today saw the December unemployment rate print at 2.8%, up from 2.7% in November. Traders are paying close attention to increasing tensions between U.S. and Iranian forces at the Strait of Hormuz. U.S. dollar offers are cited around the CHF 1.1350 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6420 and CHF 2.2050 levels, respectively.

The Australian dollar depreciated vis-à-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8685 level and was capped around the $0.8745 level. Technically, today’s intraday high was right around the 38.2% retracement of the move from US$ 0.7675 to $0.9400. Most traders expect Reserve Bank of Australia will maintain a tightening bias for the foreseeable future. Australian dollar bids are cited around the US$ 0.8535 level. The New Zealand dollar gained marginal ground vis-à-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.7680 level and was supported around the $0.7610 level. Data released in New Zealand today saw the November trade deficit narrow to –NZ$ 646 million. New Zealand dollar bids are cited around the US$ 0.7595 level.

The Canadian dollar extended recent losses vis-à-vis the U.S. dollar today as the greenback tested offers around the C$ 1.0080 level and was supported around the C$ 0.9965 level. Technically, today’s intraday low was right around the 50% retracement of the move from C$ 1.0865 to C$ 0.9060 level. Bank of Canada Governor Dodge today said the loonie is having a greater downside impact on the economy than previously anticipated. Most traders believe Bank of Canada will retain its easing bias. Canadian housing and employment numbers will be released later in the week. U.S. dollar offers are cited around the C$ 1.1075 level.