The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5825 level and was capped around the $1.5945 level. Technically, today’s intraday high was right around the 23.6% retracement of the move from $1.5610 to $1.6040. The common currency eroded during the North American session after NYMEX crude oil futures for September delivery slipped nearly $5.00 to the $126 handle. Comments from Philadelphia Fed President Plosser also sent the euro lower as Plosser reported inflationary pressures are “too high” and said policymakers may need to raise rates “sooner rather than later.” Plosser added he isn’t sure the public’s inflation expectations will remain “well-anchored.” Data released in the U.S. today saw retail sales up +1.1% m/m in the first two weeks of July. Traders await the release of the Fed’s Beige Book tomorrow. In eurozone news, European Central Bank member Bini Smaghi noted EMU-15 inflation would be “higher” without the ECB’s current monetary policy. EMU-15 May new industrial orders data will be released tomorrow. Euro bids are cited around the $1.5645/ $1.5230 levels.

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥106.90 level and was supported around the ¥106.05 level. Technically, today’s intraday high was just above the 76.4% retracement of the move from ¥107.75 to ¥103.75. Data released in Japan overnight saw the May all-industries index rise 0.4% m/m while the May tertiary index fell 0.2% in May. Also, Bank of Japan released its corporate fund demand index overnight and it fell to -16 from -4, evidencing a decrease in funding from banks. As expected, the government revised its fiscal year 2008 economic outlook and growth forecast to nominal growth of 0.3% from the previous 2.1% rate. The government also lifted its CPI forecast to 1.7% from 0.3% while the GDP deflator forecast was downwardly revised to -1.0% from +0.1%. Additionally, the government sees unemployment rising to 4.0%, industrial output falling to 0.8%, and the U.S. dollar averaging around ¥106.30 in the year to March 2009. The government reported “further rises in crude oil prices, the U.S. economic slowdown and the yen's appreciation have occurred. The economic recovery appears to be pausing, and weak movement has been seen recently.” Other data released today saw June supermarket sales off 0.9%, the third consecutive monthly decline. The government also called on households “to take risks” so that “growth can be attained.” The Nikkei 225 stock index gained 2.98% to close at ¥13,184.96. Dollar bids are cited around the ¥103.65 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥169.05 level and was capped around the ¥169.70 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥213.70 level while the Swiss franc came off vis-à-vis the yen and tested bids around the ¥104.45 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8217 in the over-the-counter market, down from CNY 6.8300. Data released in China overnight saw the June enterprise commodity price index climb 9.5% y/y. A Chinese government official reported “the tight credit policy will not change in the second half.”

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9930 level and was capped around the $2.0075 level. Cable eroded during the North American session as traders bid the greenback higher on falling energy prices. Bank of England Governor King testified today but did not comment on monetary policy. Minutes from Bank of England’s July Monetary Policy Committee meeting will be released tomorrow. Most dealers believe MPC’s Blanchflower was the only policymaker who voted for a rate cut. Cable bids are cited around the US$ 1.9870/ 1.9360 levels. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7920 level and was capped around the ₤0.7960 level.

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0295 level and was supported around the CHF 1.0135 level. Technically, today’s intraday low was right around the 50% retracement of the move from CHF 0.9625 to CHF 1.0625. Data released in Switzerland saw its trade surplus print at a new all-time high, up to CHF 2.41 billion from CHF 1.87 billion in May. U.S. dollar offers are cited around the CHF 1.0395 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6250 and CHF 2.0510 levels, respectively.