€ – The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3845 level… … and was capped around the $1.3895 level. U.S. Treasury Secretary Paulson reported the U.S. economy may pay “some penalty” on account of the recent financial market turmoil. Many data were released in the U.S. today. First, the U.S. current account deficit narrowed in –US$ 190.8 billion between April and June from a revised –US$ 197.1 billion in Q1 and is now around 5.5% of GDP. Second, July business inventories were up 0.5% with sales up 1.1%. Third, August retail sales were up 0.3% with the ex-autos and ex- gasoline component off 0.1%. Fourth, August industrial output was up 0.2% with capacity utilization at 82.2%. Fifth, U.S. August import prices were off 0.3% m/m, weaker-than-expected. These data are important because they afford the Federal Reserve a little extra justification to lower interest rates on Tuesday. Most dealers believe the Federal Open Market Committee will reduce the federal funds target rate by 25bps or 50bps at that time. Other data released today saw the mid-September University of Michigan consumer sentiment index improve to 83.8 from 83.4 at the end of August. In eurozone news, European Central Bank President Trichet reiterated EMU-13 price risks remain on the upside. European central bankers and finance ministers are meeting in Porto, Portugal this weekend to discuss the impact of the recent financial market turbulence on the eurozone economy. Data released in the eurozone today saw August harmonized consumer price inflation print at 1.7%, down from the flash estimate of 1.8% – the twelfth straight month the rate has been below the ECB’s 2.0% ceiling target. Euro bids are cited around the US$ 1.3620 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥115.40 level and was supported around the ¥114.35 level. Technically, today’s intraday low was right around the 50% retracement of the move from ¥111.60 to ¥117.10. The Japanese government kept its assessment of the economy unchanged for September but downgraded its assessment for the first time in 30 months on account of weak capital spending. The government also noted “attention should be paid to effects of developments in the U.S. economy and changes in oil prices on the Japanese economy and overseas economies.” On the political front, former foreign minister Aso appears to be the front runner to succeed outgoing Prime Minister Abe. Most traders believe Bank of Japan will keep the overnight call rate unchanged at +0.50% for the next few months and possibly lift the call rate by +25bps to +0.75% by the end of the current fiscal year in March 2008. The Nikkei 225 stock index climbed 1.94% to close at ¥16,127.42. Dollar bids are cited around the ¥113.70 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥158.75 level and was capped around the ¥160.25 level. The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested offers around the ¥230.15 and ¥96.50 levels, respectively. The Chinese yuan came off vis-à-vis the U.S. dollar as the greenback closed at CNY 7.5175 in the over-the-counter market, up from CNY 7.5105. People’s Bank of China announced it is tightening monetary policy again, effective tomorrow, by lifting deposit and lending rates by 27 bps. Data released in China today saw 2006 direct overseas investment up 73% y/y at a record US$ 21 billion. Also, urban fixed-asset investment was up 26.7% between January and August.

₤

The British pound sold off significantly vis-à-vis the U.S. dollar today as cable tested bids around the US$ 2.0055 level and was capped around the $2.0250 level. Traders continued to reduce long sterling exposure on declining expectations that the Bank of England Monetary Policy Committee will tighten monetary policy further this year. A report that U.K. mortgage lender Northern Rock PLC sought emergency funding from Bank of England pushed cable lower. The move lower was exacerbated by a leaked report from Rightmove that asking prices for houses on the market fell 2.6% m/m. Cable bids are cited around the US$ 1.9920 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.6905 level and was supported around the ₤0.6855 level.

CHF

The Swiss franc lost ground vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1920 level and was supported around the CHF 1.1835 level. Dollar offers are cited around the CHF 1.1960 level. The euro gained ground vis-à-vis the Swiss franc as the single currency tested offers around the 1.6515 level while the British pound came off vis-à-vis the Swiss franc and tested bids around the CHF 2.3845 level.

Technical Outlook at 1230 GMT (EDT + 0400)

(Bid Price) (Today’s Intraday Range)

EUR/ USD 1.3860 1.3894, 1.3847

USD/ JPY 115.10 115.38, 114.35

GBP/ USD 2.0114 2.0251, 2.0090

USD/ CHF 1.1904 1.1918, 1.1837

AUD/ USD 0.8419 0.8427, 0.8341

USD/CAD 1.0297 1.0361, 1.0279

NZD/USD 0.7140 0.7157, 0.7064

EUR/ JPY 159.55 160.23, 158.76

EUR/ GBP 0.6889 0.6901, 0.6853

EUR/ CHF 1.6502 1.6514, 1.6429

GBP/ JPY 231.48 233.29, 230.17

CHF/ JPY 96.64 97.27, 96.48

Support Resistance Support Resistance

EUR/ USD USD/ JPY

L1. 1.3515 1.3900 119.35 122.45

L2. 1.3415 1.3970 118.25 123.40
L3. 1.3245 1.4060 117.15 124.50

GBP/ USD USD/ CHF

L1. 2.0460 2.0660 1.1875 1.2200

L2. 2.0385 2.0735 1.1740 1.2325

L3. 2.0260 2.0840 1.1650 1.2430

AUD/ USD USD/ CAD

L1. 0.8720 0.8940 1.0350 1.0580

L2. 0.8640 0.9025 1.0280 1.0695

L3. 0.8560 0.9110 1.0190 1.0785

NZD/ USD EUR/ JPY

L1. 0.7925 0.8030 166.05 168.95

L2. 0.7885 0.8090 164.35 169.60

L3. 0.7780 0.8180 162.50 170.40

EUR/ GBP EUR/ CHF

L1. 0.6705 0.6760 1.6545 1.6610

L2. 0.6660 0.6840 1.6475 1.6680

L3. 0.6535 0.6930 1.6390 1.6770

GBP/ JPY CHF/ JPY

L1. 247.50 250.10 100.25 101.40

L2. 245.65 251.40 99.20 101.90

L3. 243.95 252.60 98.65 102.60

SCHEDULE

Friday, 14 September 2007
all times GMT
(last release in parentheses)

0000 NZ August PMI survey (54.6)

0430 Japan July industrial production (-0.4% m/m)

0430 Japan July industrial production (3.2% y/y)

0430 Japan July capacity utilization (105.8)

0600 Germany August consumer price index (-0.1% m/m)

0600 Germany August consumer price index (1.9% y/y)

0600 Germany August consumer price index, harmonized (2.0% y/y)

0800 Italy July industrial production (-0.1% y/y)

0900 Eurozone August consumer price index (-0.2% m/m)

0900 Eurozone August consumer price index (1.8% y/y)

1230 US Q2 current account balance (-US$ 192.6 billion)

1230 US August import price index (1.5% m/m)

1230 US August import price index (2.8% y/y)

1230 US August advance retail sales (0.3%)

1230 US August retail sales, ex-autos (0.4%)

1230 Canada Q2 labour productivity (0.7% q/q)

1230 Canada July manufacturing shipments (-1.8% m/m)

1315 US August industrial production (0.3%)

1315 US August capacity utilization (81.9%)

1400 US September University of Michigan consumer sentiment (83.4)

1400 US July business inventories (0.4%)

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