BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 22 JULY 2007

BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 22 JULY 2007

EURO:

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3840 level and was supported around the $1.3750 level. The pair gained about 50 pips last week. Fed boss Bernanke confirmed the Fed lowered its 2007 GDP forecast to 2.25% to 2.5% and still sees inflation between 2.0% and 2.25%. Bernanke also said the subprime shakeout could continue and said the housing correction could lengthen. FOMC minutes said the US$’s decline could boost inflation and expressed concerned about inflation expectations along with a “transitory” pullback in core price pressures. ECB’s Garganas reported inflation risks are increasing.

Data released in the U.S. last week saw the NYFRB’s Empire State manufacturing index improve to 26.5; headline June PPI was off 0.2% m/m; core June PPI was up +0.3%; June capacity utilization improved to 81.7% from a revised 81.4% in May; June industrial production rose 0.5% m/m from a revised -0.1% in May; May TIC portfolio inflows saw net foreign capital inflows of US$ 105.9 billion, up from April’s revised US$ 83.6 billion tally; net long-term securities purchases rose to US$ 126.1 billion from a revised US$ 80.3 billion; June headline CPI was up 0.2% m/m; June new home sales were up 2.3% y/y; June building permits were off 7.5%; June leading indicators were off 0.3% m/m; and weekly initial jobless claims were up 20,000 to 2.57 million.

Data released in the eurozone last week saw EMU-13 June harmonized inflation up 1.9% y/y; the German July ZEW economic sentiment indicator fell to +10.4 from +20.3, the second consecutive monthly decline; the EMU-13 trade surplus narrowed to €1.7 billion in May; and the Belgian National Bank July consumer confidence indicator fell to -1.

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 remained unchanged vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.5695 in the over-the-counter market. A BoE report suggested a revaluation of the yuan will not necessarily result in a revaluation of other Asian currencies. Citibank and Goldman Sachs see Q2 Chinese GDP growth approaching 11.0%. The government reported it is “highly concerned” over inflation. Bernanke called on China to let its yuan appreciate. PBOC lifted its benchmark interest rates by +27bps and lifted its six-month lending rate by +18bps.

Data released in China today saw Q2 GDP up 11.9% y/y; H1 GDP was up 11.5% y/y; June CPI was up 4.4% y/y; H1 industrial output was up 18.5% y/y; H1 fixed-asset investment was up 25.9% y/y; June nominal retail sales were up 16% y/y; June wholesale prices were up +5.4% y/y; and the urban registered unemployment rate printed at 4.1% as of the end of June.

BRITISH POUND:

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 2.0585 level and was supported around the $2.0320 level. The pair gained about 215 pips last week. The July MPC vote to hike by +25bps was closer than expected at 6-to-3. BoE’s King reiterated he expects “inflation will come down during the rest of the year.” Strong Q2 GDP data cemented expectations the MPC will hike 1-2 more times this year.

Data released in the U.K. last week saw central London June retail sales up 10.3% y/y; May nationwide house prices were up 10.9% y/y; June headline CPI was up 2.4%, down from 2.5% in May; core June CPI was up 2%, a ten-year high; the retail price index rose to 4.4% in June from 4.3% in May; average earnings growth including bonuses fell to 3.5% in the three months to May; the June claimant count fell by 13,800; the ILO unemployment rate eased to 5.4% from 5.5%; public sector net borrowing deteriorated in June; BSA and BBA mortgage lending pulled back in June; CML gross mortgage lending reached a new record high in June; June retail sales were up +0.2% m/m; IRS pay awards were steady in the three months to June; and Q2 GDP was up +0.8% q/q and an annualized +3.0%.

SWISS FRANC:

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.1960 level and was capped around the CHF 1.2055 level. The pair lost about 25 pips last week.

Data released in Switzerland last week saw May retail sales up 3.1% y/y; the July ZEW economic expectations indicator fell to -2.1 from -0.1 in June; the June trade surplus printed at CHF 1.7 billion, up from CHF 935.5 million; and June producer and import prices were unchanged m/m and up 2.8% 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$ 1.0400 figure and was capped around the C$ 1.0490 level. The pair lost about 45 pips last week.

Data released in Canada last week saw May manufacturing shipments off 0.1%, up from -0.6% in April; the June all-items CPI was off 0.2% m/m and unchanged at +2.2% y/y; June core inflation was up 2.5% y/y; May wholesale trade climbed 0.6%; and foreign investors were net sellers of Canadian securities in May.

AUSTRALIAN DOLLAR:

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.8830 level and was supported around the US$ 0.8690 level. The pair gained about 90 pips last week.

Data released last week saw the Australian May leading economic index up +6.1% and the Westpac May leading index was up +6.1% y/y.

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