The euro lost ground vis-a-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3650 level and was capped around the 1.3685 level. Liquidity was reduced during the European session on account of a bank holiday in London. French President Sarkozy called on the financial markets to exercise more transparency and continues to call on the European Central Bank to not tighten credit, contrary to most traders’ expectations for next month’s meeting. Most dealers believe policymakers will lift the overnight call rate by +25bps in September. Data released in the U.S. today include July existing home sales and traders will pay close attention to see how the current mortgage liquidity crisis may be impacting the U.S. housing market. Euro bids are cited around the US$ 1.3530 level.

The yen appreciated vis-a-vis the U.S. dollar today as the greenback tested bids around the ?116.10 level and was capped around the ?116.75 level. Technically, the pair continues to orbit the ?116.40 level, representing the 38.2% retracement of the move from ?124.15 to ?111.60. Bank of Japan did not inject liquidity into the money market today. Prime Minister Abe named ex-defense minister Fukushiro Nukaga to replace finance minister Omi today and Nukaga reported “I would like to take steps to accelerate (the economic expansion) and at the same time work on fiscal rebuilding.” Speculation is now rampant on who will replace Bank of Japan Governor Fukui next March. Data released in Switzerland today saw the July consumer confidence index fall to 96.7 from 97.5 in June. The Nikkei 225 stock index gained 0.32% to close at ?16,301.39. Dollar bids are cited around the ?114.55 level. The euro weakened vis-a-vis the yen as the single currency tested bids around the ?158.60 level and was capped around the ?159.65 level. The British pound and Swiss franc lost ground vis-a-vis the yen as the crosses tested bids around the ?232.85 and ?96.45 levels, respectively. The Chinese yuan appreciated vis-a-vis the U.S. dollar as the greenback closed at CNY 7.5604 in the over-the-counter market, down from CNY 7.5666. Data released in China today saw the July consumer confidence index fall to 96.7 from 97.5 in June.

The British pound lost ground vis-a-vis the U.S. dollar today as cable tested bids around the US$ 2.0130 level and was capped around the $2.0190 level. Today’s intraday high represents the pair’s strongest showing since 13 August. Data released in the U.K. today saw August Hometrack house prices unchanged m/m and up 5.4% y/y, the slowest progress since November 2005. Most traders believe Bank of England will lift the repo rate by +25bps to +6.00% before the end of the year. Liquidity conditions will return to normal in London tomorrow following today’s bank holiday. Cable bids are cited around the US$ 1.9915 level. The euro lost ground vis-a-vis the British pound as the single currency tested bids around the ?0.6770 level and was capped around the ?0.6795 level.

The Swiss franc came off vis-a-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2045 level and was supported around the CHF 1.2000 figure. The July UBS consumption indicator will be released tomorrow. Dollar offers are cited around the CHF 1.2140 level. The euro and British pound appreciated vis-a-vis the Swiss franc as the crosses tested offers around the CHF 1.6445 and CHF 2.4265 levels, respectively.