The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.5660 level and was capped around the $1.5945 level. The pair lost about 160 pips last week. Crude oil slipped last week, keeping the euro’s ascent limited. Treasury’s Paulson said a strong U.S. dollar is “really very important.” Philly Fed’s Plosser said the Fed may raise rates before the labour and financial markets recover. The Fed’s Beige Book reported “the pace of economic activity has slowed somewhat.” November fed funds futures see an 88% chance the Fed will hike by 25bps on 5 August. PIMCO’s Gross sees US$ 1 trillion in new mortgage losses.

Buba sees German Q2 GDP growth moderating. ECB’s Liebscher said the ECB may need to hike rates.

Data released in the U.S. last week saw the June leading index off 0.1%; June existing home sales were off 2.6% to 4.86 million annualized units; weekly initial jobless claims were up 34,000 to 406,000 with continuing jobless claims were off 9,000 to 3.107 million; June new home sales fell 0.6% to an annualized 530,000 units; the July University of Michigan consumer sentiment index improved to 61.2; June building permits were upwardly revised to +16.4%; and June durable goods orders were up 0.8%.
Data released in the eurozone last week saw EMU-15 industrial orders off 3.5% m/m and 4.4% y/y; EMU-15 PMI fell to 47.8; the German Ifo business climate index declined to 97.5; the EMU-15 May current account balance printed at -€7.3 billion; German June import prices were up 1.5% m/m and 8.9% y/y; and EMU-15 M3 money supply growth moderated to 9.5%.

The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥107.95 level and was supported around the ¥106.05 level. The pair gained about 95 pips last week. The Nikkei 225 stock index lost 1.97% on Friday to close at ¥13,334.76. The government reduced its FY 2008 GDP growth forecast to 0.3% and upped its CPI forecast to 1.7%. The GDP deflator forecast was downwardly revised to -1.0% and sees USD/JPY averaging ¥106.30 to March 2009. The government called on households “to take risk.” BoJ’s Mizuno reported it may “take more time” for the Japanese economy to recover.
Data released in Japan this week saw the May all-industries index rose 0.4% m/m; the May tertiary index fell 0.2%; Bank of Japan’s corporate fund demand index fell to -16; June supermarket sales were off 0.9%. Japanese exports were off 88.9% y/y to ¥138.6 billion; and June core CPI was up 1.9% y/y.

In Chinese news, the Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8189 in the over-the-counter market, up from CNY 6.8169. Wen sees a “sense of urgency” in controlling inflation and promoting stable growth. China reported “the tight credit policy will not change in the second half.” The government expected consumer prices to increase.
Data released in China last week saw June CPI growth up 6.1% y/y and the June enterprise commodity index climbed 9.5% y/y.

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 1.9830 level and was capped around the $2.0075 level. The pair lost about 85 pips last week. BoE’s MPC Blanchflower sees the U.K. economy “going into a recession” and sees rates “well below” 5.0%. MPC members voted 7-1-1 to keep rates steady with Blanchflower calling for a 25bps cut and Besley wanting a 25bps hike.
Data released in the U.K. last week saw Rightmove July house prices off; June LRC retail sales were up 8.7% y/y; manufacturing confidence fell; the CBI June monthly order book balance fell to -8; June BBA mortgage approvals were at a series low; June retail sales fell 3.9%; and Q2 GDP was up 0.2%.

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.0405 level and was supported around the CHF 1.0135 level. The pair gained about 145 pips last week.
Data released in Switzerland last week saw June producer and import prices up 0.6% m/m and 4.5% y/y.

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0195 level and was supported around the C$ 0.9990 level. The pair gained about 135 pips last week.
Data released in Canada last week saw June headline inflation up an annualized 3.1%; all-items CPI were up 0.7% m/m and 3.1% y/y; core CPI was up 0.1% m/m and 1.5% y/y; and May retail sales were up 0.4% to C$ 35.8 billion.

The Australian dollar depreciated vis-à-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.9535 level and was capped around the US$ 0.9790 level. The pair lost about 130 pips last week. NAB raised provisions for CDO exposure by an additional A$ 830 million.
Data released in Australia last week saw Q2 PPI up 1.0% q/q; Q2 core inflation was up 1.5% q/q and 4.5% y/y; and July job vacancies were off 2.7% m/m and 13.8% y/y.