BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 15 JULY 2007

BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 15 JULY 2007

EURO:

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3815 level and was supported around the $1.3595 level. The pair gained about 160 pips last week. U.S. housing woes were exacerbated after Home Depot slashed earnings estimates amid “challenging” housing market conditions. Subprime woes led to ratings downgrade warnings from S&P and Moody’s. Philly Fed’s Plosser doesn’t see any “significant spillover effects.” France’s Sarkozy created some Ecofin tension when he announced French plans to reduce its budget deficit. ECB’s Garganas reported “interest rates are still relatively low” while ECB’s Hurley said the ECB will “monitor closely” developments. The ECB reported rates “remain on the accommodative side.” Anecdotal evidence from U.S. retailers evidenced a relatively weak June.

Data released in the U.S. last week saw May wholesale inventories up +0.5%; German May industrial production was up 1.9% m/m; Germany’s May trade surplus expanded to €17.5 billion; the May trade balance expanded by 2.3% to –US$ 60.04 billion; weekly initial jobless claims were off 12,000 to 308,000; continuing jobless claims were off 4,000 to 2.554 million; June retail sales were off 0.9 and ex-autos, were off 0.4%; June import prices rose 1% m/m; and the mid-July University of Michigan consumer sentiment index printed at 92.4, up from 85.3.

Data released in the eurozone last week saw German June wholesale prices up 0.1% m/m and 1.9% y/y; EMU-13 Q1 GDP growth expanded +0.7% q/q and +3.1% y/y; and EMU-13 May industrial output was up +0.9% m/m and +2.5% y/y.

YEN:

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥120.95 level and was capped around the ¥123.65 level. The pair lost about 130 pips last week. The Nikkei 225 stock index closed the week at ¥18,238.95. Japan may create a new entity to manage its US$ 900 billion in foreign reserves. BoJ’s Policy Board kept the overnight call rate unchanged at +0.50% with Mizuno the sole dissenter. BoJ boss Fukui reiterated his plans to lift rates “gradually.” BoJ’s monthly economic assessment was unchanged and Nikkei reported the government may upgrade consumer spending. Upper house election campaigns began last week and the LDP could face an uphill battle, possibly delaying a BoJ hike.

Data released in Japan last week saw the June economy watchers’ index fall to 46.0 from 46.8 in May; May core private sector machinery orders surged 5.9% m/m; the June money supply was up 1.8% y/y; June bank lending was up 0.7% y/y; the June wholesale goods price index rose 2.3% y/y; the May current account surplus was up 31.1% y/y; the June domestic corporate goods price index was up 2.3% y/y; June consumer confidence fell to 45.0 in June; and May revised industrial output was off 0.3% m/m.

CHINESE YUAN:

The Chinese yuan appreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.5695 in the over-the-counter market, down from CNY 7.6010. China and the EU convened last week to discuss global imbalances and trade issues. Deutsche sees June CPI north of 4%. Citigroup sees the yuan appreciating in Q3 and Goldman Sachs sees Q3 GDP around 12%. A government think-tank reported real retail sales growth will be about 12.8% y/y.

Data released in China today saw the June trade surplus expand to US$ 29.6 billion; Q2 consumer confidence improved; China’s FX reserves reached US$ 1.33 trillion at the end of last month; China upwardly revised its 2006 GDP growth rate to 11.1% from 10.7%; M2 money supply was up 17.06% y/y; and H1 foreign direct investment was up 12.17% y/y to US$ 31.89 billion.

BRITISH POUND:

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 2.0365 level and was supported around the $2.0105 level. The pair gained about 265 pips last week. BoE’s Gieve was less than hawkish in saying wage settlements have remained calm despite the spike in RPI and warned consumers may “be becoming a bit more cautious.” BRC saw a “major improvement” in Q2 manufacturing activity. RICS house prices fell in June to their lowest level since January 2006. BoE’s Bean noted “the importance of keeping inflation expectations anchored cannot be stressed enough.” The MPC’s July rate deliberation minutes will be released this week.

Data released in the U.K. last week saw BRC like-for-like retail sales rose 3.0% y/y in June; Nationwide Q2 house prices were up an annualized 10.2%; and June producer output prices were up 0.2%; and producer input prices were up 0.6% m/m and 2.1% y/y.

SWISS FRANC:

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.1985 level and was capped around the CHF 1.2195 level. The pair lost about 155 pips last week. UBS sees GDP growth around 2.8% in 2002 and 2003 with capacity utilization now around 90.7%.

CANADIAN DOLLAR:

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 1.0440 level and was capped around the C$ 1.0610 level. The pair lost about 15 pips last week. BoC raised its key lending rate by +25bps to 4.50% and noted it may need to lift rates a little higher. BoC’s Monetary Policy Report upped its 2007 GDP forecast to 2.5% but predicted the loonie’s strength could restrain growth in 2008 and 2009. Canada’s Alcan may be a takeover target by Rio Tinto.

Data released in Canada last week saw June housing starts fall to 226,000 from 229,700; the May new house price index was up 1.1% m/m and 8.6% y/y; and the May trade surplus narrowed to C$ 5.9 billion.

AUSTRALIAN DOLLAR:

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.8695 level and was supported around the US$ 0.8560 level. The pair gained about 105 pips last week.

Data released last week saw the NAB business confidence index unchanged in June at 15.0; May housing finance by volume was up 0.1% m/m; the July leading employment indicator rose to +0.057; the July Westpac consumer sentiment index fell to 120.8 in July, off 0.6% m/m; and June’s jobless rate ticked up to 4.3%.


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