BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 29 JULY 2007

BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 29 JULY 2007

EURO:

The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.3630 level and was capped around the $1.3850 level. The pair lost about 180 pips last week. A repricing of risk in U.S. credit markets followed worsening U.S. subprime problems. Trichet called the credit markets correction as “healthy.” Buba reported German Q2 GDP growth likely decelerated. ECB’s Bini-Smaghi said the euro’s recent strength reflects “the weakness of the U.S. economy.” ECB’s Kranjec labeled himself an “inflation hawk” while ECB’s Stark said a rate hike in September or October seems plausible. Stark also said the euro’s ascent is not a problem provided it is not “abrupt.” Treasury boss Paulson said the U.S. economy is “very healthy.” The Fed’s Beige Book reported consumer prices continue to expand “at a moderate rate.” The FOMC meets on 7 August and the ECB will likely hike by +25bps in September. Fed funds futures are pricing in about a 80% chance the FOMC will lower by +25bps by the end of 2007.

Data released in the U.S. last week saw the Chicago Fed’s June National Activity Index improve to +0.11; Redbook retail sales were up 0.5% m/m; June existing home sales were off 3.8% to 5.75 million units; June home sales were off 6.6% to an annualized 834,000 units; weekly initial jobless claims were off 2,000 to 301,000; continuing jobless claims were off 19,000 to 2.55 million; durable goods were up 1.4% m/m in May and were off 0.5% ex-transportation; non-defense capital goods excluding aircraft orders were off 0.7% after falling 1.5% in May; June building permits were revised to -7.0% from -7.5%; Q2 GDP growth accelerated to +3.4%; the core PCE price index was up 1.4%; and the final July University of Michigan consumer sentiment index improved to 90.4 from 85.3.

Data released in the eurozone last week the EMU-13 PMI manufacturing survey fall to 54.8; EMU-13 May industrial orders were up 1.7% m/m and 9.1% y/y; the EMU-13 May current account deficit widened to -€8.6 billion; the Belgian National Bank July business confidence indicator fell to 4.2; the German July Ifo business climate index fell to 106.4 from 107.0 in June; the EMU-13 money supply was up 10.9% from 10.6% in May; EMU-13 June private sector credit growth was up 10.8% y/y; and the German GfK consumer confidence improved to +8.7 from +8.5 in July.

YEN:

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥118.00 figure and was capped around the ¥121.70 level. The pair lost about 260 pips last week. The Nikkei 225 stock index closed the week at ¥17,283.81. This weekend’s Upper House elections could see the LDP lose its majority. Inflation data confirmed that modest deflationary pressures remain evident in the economy.

Data released in Japan last week saw June supermarket sales off 1.5% y/y; the June trade surplus was up 53.4% y/y to ¥1.226 trillion; the June corporate services price index rose +0.1% m/m and +1.4% y/y; foreign investors were net buyers of Japanese equities for the fourth consecutive week; the June nationwide core consumer price index fell 0.1% y/y with the headline off 0.2% m/m; July Tokyo-area core CPI was off 0.1% y/y with the headline off 0.1%;

CHINESE YUAN:

The Chinese yuan appreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.5623 in the over-the-counter market, down from CNY 7.5695. The Politburo reported it will “prevent general price levels from rising too quickly” and added “the appropriately stable monetary policy should be moderately tightened.” The U.S. Senate approved legislation legislation that requires the U.S. Treasury to negotiate with countries that have “fundamentally misaligned” currencies and to impose penalties on countries that do not take action.

Data released in China last week saw June property prices in 70 major cities up 7.1% y/y.

BRITISH POUND:

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 2.0245 level and was capped around the $2.0655 level. The pair lost about 300 pips last week. BoE’s Gieve warned the subprime market woes in the U.S. could be felt globally. NIESR reported the U.K. economy will likely slow in 2008 and 2009.

Data released in the U.K. last week saw Rightmove house prices up 0.3% m/m; the CBI new orders book balance fell to -6 in July from +8 in June; the CBI industrial output balance fell to +10 in July from +25 in June; May average earnings were up 4.4% y/y; YouGov CPI expectations were up to 2.5% for twelve months in July; Nationwide’s house price inflation eased to 9.9% y/y in July from 11.1% in June; BBA June mortgage approvals were lower; and June Land Registry house price inflation in England and Wales was up 0.4% m/m.

SWISS FRANC:

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.2165 level and was supported around the CHF 1.1985 level. The pair gained about 20 pips last week.

Data released in Switzerland last week saw the July KOF leading indicator rise to +2.13 from a revised +2.08 in June.

CANADIAN DOLLAR:

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0610 figure and was supported around the C$ 1.0340 level. The pair gained about 140 pips last week. A manufacturing outlook survey saw Canadian manufacturers maintain positive on output and hiring in Q3.

Data released in Canada last week saw May retail sales rise 2.8% m/m with the ex-automobiles component was up 2.3%.

AUSTRALIAN / NEW ZEALAND DOLLAR:

The Australian dollar deprciated vis-à-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.8525 level and was capped around the US$ 0.8870 level. The pair lost about 260 pips last week. RBA could hike rates as early as next month. RBNZ lifted its official cash rate by +25bps to 8.25% with RBNZ boss Bollard predicting recent hikes “should be sufficient.”

Data released last week saw Q2 final PPI up 1.0% q/q and 2.3% y/y; Australian skilled vacancies were off 0.1% m/m; and the trimmed mean CPI measure was up 0.9% q/q and 2.7% y/y.


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