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The euro depreciated vis-?-vis the U.S. dollar last week as the single currency tested bids around the $1.5300 level and was capped around the $1.5845 level. The pair lost about 425 pips last week. Bush verbally intervened to support the dollar. Bernanke remained hawkish saying ?The Fed will strongly resist an erosion in longer-term (inflation) expectations.? Boston Fed?s Rosengren sees a ?relatively low correlation between oil price movements and the underlying core rate of inflation.? Paulson said currency intervention remains a tool. The Fed?s Beige Book pointed to a ?generally weak? economy. Traders are watching the G8 meeting in Osaka this weekend with little expectation policymakers will move beyond their April FX statement.

Germany?s RWI lifted its 2008 inflation forecast to 3.0%. ECB?s Liikanen hawkishly said the ECB is in a ?state of heightened alertness.? Trichet said rates may move higher a ?small amount? from next month. Noyer said the markets expect a rate hike while Stark said he doesn?t foresee a series of rate hikes. Weber reiterated the ?state of heightened alertness? mantra as did Bini-Smaghi. The ECB?s monthly bulletin was very cautious about negotiated wage deals. Germany?s RWI Institute lifted its 2008 GDP growth forecast outlook to 2.2% from 1.7%. ECB?s Gonzalez-Paramo and Quaden suggested the ECB may only hike rates next month. Irish voters voted down the Lisbon Treaty. Bank of France reduced its Q2 GDP growth estimate to 0.2% from 0.3%.

Data released in the U.S. last week saw April pending home sales were up 6.3% m/m and 13.1% y/y; the April trade deficit increased 7.8% m/m to US$ 60.9 billion; may overall import prices were up 2.3% with upward revisions to April?s and March?s tallies; May import prices were up 17.8% y/y with the ex-petroleum component up 0.5% m/m; weekly initial jobless claims were up 58,000 to 3.139 million; May retail sales were up +1.0%; April business inventories were up +0.5%; University of Michigan preliminary June consumer sentiment fell to 56.7; May headline CPI was up +0.6% m/m and +4.2% y/y with the ex-food and energy component up +0.2% m/m and +2.3% y/y; and real hourly earnings were up +0.3% in May.

Data released in the eurozone last week saw Germany?s April trade surplus rise to ?18.7 billion; French May CPI was up 0.5% m/m and 3.3% y/y; EMU-15 April industrial output was up 0.9% m/m and 3.9% y/y; EMU-15 Q1 wage growth was up 3.7% y/y; EMU-15 Q1 unemployment was up 0.3% q/q and 1.6% y/y; and Germany final May CPI was up 0.6% m/m and 3.0% y/y.


?/ CNY

The yen depreciated vis-?-vis the U.S. dollar last week as the greenback tested offers around the ?108.40 level and was supported around the ?104.40 level. The pair gained about 330 pips last week. The Nikkei 225 stock index gained 0.61% on Friday to close at ?13,973.73. S&P affirmed Japan?s long-term and short-term ratings with a stable outlook. The G8 is not expected to mention FX at length in its communiqu? this weekend. BoJ?s Policy Board kept its overnight call rate unchanged at 0.50% with Shirakawa cautioning about further ?downside risks.? BoJ?s Policy Board kept its economic assessment unchanged.


Data released in Japan this week saw the May economy watchers? index decline at 32.1; the April leading indicator printed at 30.0 with the coincident index at 22.2; May bank lending was up 1.6%; M2+CD money supply growth was up 2.0%; May corporate failures were off 1.9%; May corporate bankruptcies were down 2.2% y/y; April machinery orders rose 5.5% m/m to ?1.0 trillion with core orders for the first time in three months; the May domestic corporate goods price index was up +4.7% y/y; real GDP was up +1.0% q/q in the January ? March period; the April current account surplus was off 29.6% y/y to ?1.381 trillion; May consumer sentiment fell to 33.9; and April industrial output was downwardly revised 0.2% m/m.
In Chinese news,the Chinese yuan appreciated vis-?-vis the U.S. dollar as the greenback closed at CNY 6.9018 in the over-the-counter market, down from CNY 6.9230. PBoC lifted the reserve requirement on bank deposits to 17.5%, its fifth hike this year and pledged action to ?prevent prices from growing too rapidly.?
Data released in China last week saw the May trade surplus print at US$ 20.21 billion; May PPI was up 8.2% y/y; May CPI was up 7.7% y/y; end-May M2 money supply was up 18.07%; January ? May actual foreign direct investment was up 54.97% to US$ 42.778 billion; and May retail sales climbed 21.6% y/y to CNY 870.4 billion.




₤

The British pound depreciated vis-?-vis the U.S. dollar last week as cable tested bids around the US$ 1.9410 level and was capped around the $1.9800 level. The pair lost about 240 pips last week. BoE will unveil a new liquidity program later this year. NIESR reported the U.K. economy ?scarcely? grew in the three months to May. BoE repo demand reached its highest level since October 2007. BoE?s inflation survey revealed the public believes inflation to be around 3.9%. MPC?s Tucker warned the U.K. is ?facing a nasty shock to costs from rising commodity prices and sterling?s depreciation.? The government is likely to revise its March economic growth and inflation estimates.

Data released in the U.K. last week saw May input and output prices were up 27.6% and 8.9%, respectively, with core output prices up 5.9%; BRC May consumer confidence fell to 79 from 94 in November; BRC May retail sales were up more than expected; RICS May house prices were higher with transactions at record lows; April industrial production rose 0.2% m/m and 0.2% y/y; the May claimant count of jobseekers rose 9,000 while April?s was upwardly revised to 11,200; headline average earnings were up 3.8% in the three months to April; the April trade in goods deficit widened to ₤4.3 billion; April CML mortgage loans for house purchases rose 9% m/m; and April new construction orders fell 2% y/y.

CAD

The Canadian dollar depreciated vis-?-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0320 level and was supported around the C$ 1.0150 level. The pair gained about 95 pips last week. BoC kept its key overnight rate unchanged at 3.0% and noted inflation projections have ?shifted slightly to the upside? adding monetary policy is ?appropriately accommodative.?

Data released in Canada last week saw April housing starts increased 3.5% m/m to an annualized rate of 221,300 units; Q1 capacity utilization fell to 79.8% from 81.8% in Q4; April new house price growth moderated to +5.2% y/y; and April manufacturing shipments were up 2%.


CHF

The Swiss franc depreciated vis-?-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.0540 level and was supported around the CHF 1.0145 level. The pair gained about 310 pips last week.

Data released in Switzerland last week saw May unemployment fall to 2.4% from 2.6% in April.

AUD

The Australian dollar depreciated vis-?-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.9335 level and was capped around the US$ 0.9645 level. The pair lost about 250 pips last week. RBA Governor Stevens hawkishly said strong growth in commodity prices means vigilance must be maintained on inflation.

Data released in Australia last week saw ANZ May job advertisements post their largest decline in eight years; April owner-occupied dwelling financings fell 3.0% to 57,303; April NAB business confidence was up +4 points; June consumer sentiment printed at -5.6%; and the May unemployment rate held steady at 4.3%.