BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 5 August 2007

BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 5 August 2007

EURO:

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3790 level and was supported around the $1.3610 level. The pair gained about 150 pips last week. Evidence emerged that the U.S. credit shakeout from migrated to other asset classes such as corporate bonds and to other global markets. St. Louis Fed chief Poole said the Fed will “not ignore” market uncertainty and won’t contribute to it with the Fed’s policy. The FOMC is expected to keep rates unchanged on Tuesday and acknowledge the reassessment of risk in the credit markets.

The ECB kept the refinancing rate unchanged at 4.00% with Trichet twice pledging “strong vigilance.” Most traders see a +25bps hike next month by the ECB.

Data released in the U.S. last week saw the Q2 employment cost index was up +0.9% with benefit costs up 1.3%; June personal spending was up +0.1%; June personal incomes were up +0.4%; the core PCE price index was up +0.1% and +1.9% y/y; July consumer confidence improved to 112.6 from 105.3 in June; June construction spending was down 0.3%; July Chicago PMI fell to 53.4 from 60.2; June pending home sales were up 5.0%; the July ISM manufacturing index fell to 53.8 from 56.0 in June; July ADP payrolls were up 48,000; weekly initial jobless claims were 4,000 to 307,000; continuing jobless claims were off 16,000 to 2.53 million; June factory orders were up +0.6%; July non-farm payrolls were up 92,000 with a cumulative -8,000 downward revision for May and June; July unemployment ticked up to 4.6% from 4.5%; July average hourly earnings were up +0.3% m/m and +3.9% y/y; and the July ISM services index moved lower to 55.8.

Data released in the eurozone last week saw German June wholesale sales up +0.1% m/m and +0.2% y/y; the EMU-13 preliminary July HICP moderated to +1.8% from +1.9% in June; the EMU-13 July economic sentiment indicator fell to 111.0 from 111.7; the German July jobless rate at 3.715 million, up 28,000; June retail sales were up +0.7% m/m and off 0.8% y/y; the July PMI survey printed at 54.9, down from June’s 55.4 tally; EMU-13 June PPI was up +0.1% m/m and +2.3% y/y; and June retail sales were up +0.9% m/m and +0.4% y/y.

YEN:

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥117.60 figure and was capped around the ¥119.50 level. The pair lost about 5 pips last week. The Nikkei 225 stock index closed the week at ¥16,979.86. The LDP lost the Upper House election last weekend and Abe’s reform agenda is now imperiled. BoJ announced it will gradually sell the ¥2 trillion in equities it has acquired since September 2002. An MoF official said most carry trades a “resistant to exchange rate fluctuations” and finance chief Omi said exchange rates must follow fundamentals.

Data released in Japan last week saw June industrial output up 1.2% m/m and 1.0% y/y; the June unemployment rate fell to 3.7% from 3.8% in May; household spending was up +0.1% y/y; average monthly cash earnings were off 1.1% y/y; June construction orders were up 26.4% y/y; June housing starts were up 6.0% y/y; June orders by the 50 largest contractors were up 26.4% y/y; average land prices were up 8.6% y/y in 2006; the July monetary base fell 2.3% y/y; and foreign investors were net sellers of Japanese equities for the first time in five weeks.

CHINESE YUAN:

The Chinese yuan depreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.5670 in the over-the-counter market, up from CNY 7.5623. PBOC tightened monetary policy by lifting the reserve requirement by +50bps to 12.0%. Paulson visited Beijing to pressure China on the yuan. Finance chief Jin Renging reported “China must perform our reforms in the exchange regime. We will not follow others’ words. We have continued flexibility since July 2005.”

Data released in China last week saw June consumer confidence print at 97.5, up from 96.7 in May and the CFLP July PMI survey came in at 53.3 while the CLSA July PMI printed at 53.2.

BRITISH POUND:

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 2.0425 level and was supported around the $2.0180 level. The pair gained about 135 pips last week. The MPC kept the repo rate unchanged at +5.75% and offered no policy statement. A +25bps move is expected in September or October.

Data released in the U.K. last week saw net mortgage lending up £9.6 billion in June; mortgage approvals were steady around 114,000; June net lending to individuals rose to £10.4 billion; the final M4 money supply was downwardly revised to 12.9% from 13.0%; the July GfK/ NOP headline consumer confidence index retreated to -6 from -3 in June; the CBI retail sales survey saw a balance of +18% y/y, up from +17% in June; the July CIPS PMI survey rallied to 55.7; Nationwide consumer confidence remained steady; July BRC shop prices were up 0.6% y/y; IDS median pay settlements were up +3.5% in the three months to July; Halifax July house prices were up +0.7% m/m and +11.2% y/y; July construction PMI improved to 61.8; and the July CIPS PMI services index fell to 57.0 from 57.7 in June.

SWISS FRANC:

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.1920 level and was capped around the CHF 1.2100 level. The pair lost about 165 pips last week.

Data released in Switzerland last week saw the June UBS private consumption indicator rise to +2.31 from +2.10 in May; the July PMI survey improved to 63.0 from 62.8; and July consumer price inflation was off 0.6% m/m and up 0.7% y/y.

CANADIAN DOLLAR:

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 1.0500 figure and was capped around the C$ 1.0700 figure. The pair lost about 85 pips last week.

Data released in Canada last week saw May GDP +0.3% m/m

AUSTRALIAN / NEW ZEALAND DOLLAR:

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.8615 level and was supported around the US$ 0.8445 level. The pair gained about 65 pips last week. RBA is expected to lift its official cash rate by +25bps on 8 August.

Data released last week saw June new home sales off 0.8% m/m; June building approvals jumped 7.5% m/m; June private sector credit growth 1.8% m/m and 15.4% y/y; the June trade deficit widened to –A$ 1.751 billion; June retail sales were up 1.4% m/m; the July performance of manufacturing index was up to +4.3; the July inflation gauge was up +0.6% from +0.2% in June; and the July performance of services index rallied +1.1 index points from June’s tally.

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