The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.3700 level and was capped around the $1.4570 level. The pair lost about 845 pips last week. The Fed sharply increased its swap lines with major central banks to provide US$ liquidity. Federal funds and Libor rates were significantly elevated. Fed funds futures are pricing in a 70% chance the FOMC will cut 50bps this month. Kansas City Fed’s Hoenig said rates should be normalized after the current turmoil passes. The U.S. Senate and House passed a US$ 700 billion bailout package. Broad-based industry job losses in the U.S. NFP number heightens the likelihood of an economic recession.

Fortis and Dexia received emergency cash infusions and EU officials said Europe does not require its own bailout plan.

Data released in the U.S. last week saw the Chicago Fed’s August manufacturing index fall 2.6% m/m; August consumer spending was unchanged with personal income up 0.5%; core PCE was up +0.2% m/m and +2.6% y/y; the July Case-Shiller home price index was off a record 16.3% y/y; September consumer confidence improved to 59.8; September ADP private-sector jobs fell 8,000; September construction spending slowed; September ISM manufacturing fell to 43.5; August factory orders fell 4.0% m/m with ex-transportation off 3.3%; weekly initial jobless claims rose 1,000 to 497,000 with continuing jobless claims up 48,000 to 3.591 million; and September non-farm payrolls were off 159,000 with the unemployment rate at 6.1% and average hourly earnings were up 0.2%.

Data released in the eurozone last week saw EMU-15 September economic sentiment fall sharply; EMU-15 September flash consumer price inflation fell to 3.6% from 3.8% in August; August French producer prices fell; Germany’s jobless tally fell 29,000; German August real wholesale sales were up 0.5% m/m; EMU-15 unemployment printed at 7.5%; German retail sales climbed 4.6% m/m; EMU-15 manufacturing fell to 45.0 in September; EMU-15 retail sales were up 0.3% m/m in August; and EMU-15 September PMI services were near a five-year low.

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥103.50 level and was capped around the ¥106.95 level. The pair lost about 70 pips last week. The Nikkei 225 stock index index lost 1.94% to close at ¥10,938.14. BoJ chief Shirakawa said “dollar liquidity has almost dried up.” BoJ deputy Nishimura said policy will remain neutral but would not rule out options. The cabinet passed a US$ 17 billion supplementary budget. PM Aso vowed to restore Japan’s economic health. Swap contracts are pricing in a 25bps rate cut by early 2009. BoJ is expected to keep rates unchanged this week.

Data released in Japan last week saw August retail sales climb +0.7% y/y; August housing starts climbed 53.6%; the August jobless rate reached a two-year high at 4.2%; August industrial output was off 3.5% m/m; August all-household spending declined 4.0% y/y; September manufacturing PMI fell; the BoJ quarterly tankan sentiment for large manufacturers fall to -3 with FY 2008-2009 capex plans at +1.7%; August wage earners’ cash earnings were off 0.3% y/y; and the September monetary base climbed 0.9% y/y.

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 1.7550 level and was capped around the $1.8365 level. The pair lost about 730 pips last week. U.K. lender Bradford & Bingley was nationalized. BoE’s credit conditions survey revealed tightening credit standards to individuals and businesses. BoE may possibly cut rates this week by 25bps. BoE broadened eligible collateral for repo operations.

Data released in the U.K. last week saw August mortgage approvals collapse at 32,000; M4 sterling lending increased to ₤22.5 billion in August; August net consumer credit edged higher to ₤1.2 billion; final Q2 GDP growth was upwardly revised to 1.5%; July services output rose 0.6% m/m; September manufacturing PMI fell to 41.0; September Nationwide house prices were off 1.7% m/m; IDS pay awards climbed in the three months to August; the CIPS PMI services survey worsened to 46.0 in September; and BoE Q2 housing equity withdrawal turned negative.

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.1410 level and was supported around the CHF 1.0810 level. The pair gained about 385 pips last week. SNB doubled its US$ swap lined with the Fed. KoF said the Swiss economy will likely enter a recession and the SNB will likely cut rates twice. KoF sees 2009 GDP growth around 0.3%. EBK said Swiss banks are well-capitalized. SNB sees 2009 GDP growth “considerably” lower than 2008.

Data released in Switzerland last week saw the August UBS consumption indicator fall to 1.62; September manufacturing PMI fell; and September CPI rose 0.1% m/m and 2.9% y/y with the core rate at 2.1%.

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0840 level and was supported around the C$ 1.0335 level. The pair gained about 490 pips last week.

Data released in Canada last week saw July GDP growth up 0.7% and August industrial product prices were off 0.2%.

The Australian dollar depreciated vis-à-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.7695 level and was capped around the US$ 0.8330 level. The pair lost about 570 pips last week. RBA is expected to cut interest rates by 50bps this week.

Data released in Australia last week saw August private credit growth rose 0.5%; August retail sales were up +0.3%; August building approvals were off 3.7%; September manufacturing contracted; the August trade surplus was at its highest in a decade at A$ 1.364 billion; the service sector contracted for a sixth consecutive month; and a private inflation gauge turned higher in September.