The euro recovered some recent lost ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5745 level and was supported around the $1.5650 level. The common currency retraced most of yesterday’s losses as traders reacted to news that Iran had test-fired nine missiles overnight, some of which were capable of reaching Israel. NYMEX crude oil futures for August delivery re-tested the $138 handle on the news. The pair was also bid higher on hawkish rhetoric from European Central Bank officials. ECB’s Ordozez reported there is a risk of an inflation wage spiral while ECB’s Trichet reported “In the wake of renewed sharp commodities price increases, (inflation) arrived at the worrying levels of around 4.0 percent in mid-2008. Looking ahead, the annual (inflation) rate is likely to remain well above the levels consistent with price stability for sometime, moderating only gradually in 2009.” ECB member Gonzalez Paramo reported policymakers will do what is necessary for price stability. German finance minister Steinbrueck cited “downward risks” to German economic growth while Germany’s IWH lifted its 2008 GDP growth forecast to 2.3% from 1.5%. Data released in the eurozone today saw EMU-15 Q1 GDP growth downwardly revised to 0.7% from 0.8%. Also, Germany’s May trade surplus printed at €14.4 billion, down from €18.8 billion in April. In U.S. news, Richmond Fed President Lacker reported the Fed may need to raise interest rates even if the U.S. economy remains weak. Euro bids are cited around the $1.5645/ $1.5230 levels.

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥107.00 figure and was capped around the ¥107.65 level. Technically, today’s intraday low was just below the 76.4% retracement of the move from ¥108.55 to ¥105.00. The pair gave back some of yesterday’s intraday gains. The Group of Eight summit in Hokkaido concluded without much fanfare. Data released in Japan overnight saw June machine tool orders off 2.7% y/y while May machinery orders rose 10.4%. The Nikkei 225 stock index gained 0.15% to close at ¥13,052.13. Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥168.90 level and was supported around the ¥168.05 level. The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥212.10 and ¥104.30 levels, respectively. In Chinese news, the U.S. dollar closed at CNY 6.8598 in the over-the-counter market. European Central Bank President Trichet said the message to China about its exchange rate regime “is clear.” Data released in China overnight saw Q2 consumer confidence fall to 94.1.

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9795 level and was supported around the $1.9670 level. Sterling clawed back some of yesterday’s losses following the U.S. dollar’s decline across the board. Data released in the U.K. today saw the May trade balance stable at -₤7.5 billion while the BRC June shop price index was up 2.5% y/y. Also, Nationwide reported June consumer confidence slid. Bank of England’s Monetary Policy Committee convenes tomorrow and it not expected to change its repo rate. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7945 level and was capped around the ₤0.7975 level.

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0275 level and was capped around the CHF 1.0350 level. U.S. dollar bids are cited around the CHF 1.0250 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6230 and CHF 2.0415 levels, respectively.