The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.5945 level and was supported around the $1.5610 level. The pair gained about 185 pips last week. Bush talked up the U.S. dollar. San Francisco Fed’s Yellen said the Fed will prevent a wage-price spiral. The G8 expressed “strong concern” about food and energy prices. Fed boss Bernanke said the credit facility for primary dealers may be extended “beyond year end.” Richmond Fed’s Lacker said the FOMC may have to raise rates even if the economy remains weak. The dollar was bloodied by a meltdown in U.S. mortgage GSE giants Fannie Mae and Freddie Mac, both of whom require capitalizations. Fed boss Bernanke testified on Tuesday and Wednesday.
ECB’s Juncker said the rate hike was a “signal” to wage negotiators. ECB’s Papademos pledged to pursue price stability. ECB’s Ordonzez warned of an inflation wage spiral. ECB’s Trichet sees “worrying” inflation remaining elevated through 2009. ECB’s Gonzalez said the ECB will do what is necessary. Germany’s Steinbrueck sees “downside risks” to the German economy. Germany’s IWH lifted its 2008 GDP forecast to 2.3%.

Data released in the U.S. last week saw the Conference Board June employment index fall 0.6% to 111.9; May pending home sales were off 4.7% m/m and 14% y/y; May wholesale inventories were off 0.8%; the May trade balance was off 1.2% to –US$ 59.8 billion from April’s –US$ 60.5 billion; and the University of Michigan’s mid-July consumer sentiment indicator printed at 56.6.
Data released in the eurozone last week saw May industrial output off 2.4% m/m; EMU-15 Q1 GDP was downwardly revised to 0.7%; Germany’s May trade surplus printed at €14.4 billion; and German June wholesale prices were up 0.9% m/m and 8.9% y/y.

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥105.65 level and was capped around the ¥107.75 level. The pair lost about 70 pips last week. The Nikkei 225 stock index lost 0.21% on Friday to close at ¥13,039.69. G8 officials convened in Hokkaido. BoJ Governor Shirakawa reported said the economy is slowing and inflation is rising. BoJ’s Policy Board will likely keep rates unchanged this week. The Nikkei reported the government is expected to keep its economic assessment unchanged for the fifth consecutive month.

Data released in Japan this week saw foreign reserves at ¥1.00 trillion in June; the economy watchers’ current conditions index fell to 29.5 in June; June bank lending was up 2.0%; the M2 money supply rose 2.3% in June; June corporate failures were up 7.1%; June machine tool orders fell 2.7% y/y; May machinery orders rose 10.4%; May revised industrial output was up 2.8% m/m; and June consumer confidence fell to 32.6.

In Chinese news, the Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8340 in the over-the-counter market, down from CNY 6.8589. ECB’s Trichet said the global position on China’s FX regime is not ambiguous.
Data released in China last week saw Q2 consumer confidence fall to 94.1.

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 1.9960 level and was supported around the $1.9645 level. The pair gained about 65 pips last week. NIESR reported GDP growth will be around 0.2% in the three months to June. BCC sees a “serious risk” of a technical recession by summer’s end. U.K. banks are expected to ask BoE to extend its Special Liquidity Scheme to enhance liquidity.

Data released in the U.K. last week saw May manufacturing output fall 0.5% m/m and 0.8% y/y; April industrial production fell 0.8% m/m and 1.6% y/y; the government house price measure slowed to its lowest level in more than two years; CML May house prices were up marginally in May; the May trade balance was stable at -₤7.5 billion; the BRC June shop price index was up 2.5% y/y; and Nationwide June consumer confidence fell.

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.0135 level and was capped around the CHF 1.0350 level. The pair lost about 70 pips last week.
Data released in Switzerland last week saw June unemployment fall to 2.3% from 2.4% in May.

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 1.0065 level and was capped around the C$ 1.0230 level. The pair lost about 95 pips last week. BoC reported prices will continue rising in the next twelve months and added credit conditions have tightened over the past three months.
Data released in Canada last week saw May building permits were up 1.1% to C$ 6.54 billion; June housing starts were off 4.3% to 217,800; May new house prices were up 4.1% y/y; the May trade surplus widened to C$ 5.5 billion; and the June unemployment rate printed at 6.2% with a net change of -5,000 in employment.

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.9715 level and was supported around the US$ 0.9475 level. The pair gained about 35 pips last week.
Data released in Australia last week saw the June construction sector index fall to 40.3; the NAB overall business conditions index fell to 0; May housing finance fell 7.9% m/m; July consumer sentiment is at a 16-year low; and the leading employment indicator fell to -0.060 in July.