The euro appreciated modestly vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4305 level and was supported around the $1.4220 level. Traders are awaiting the release of Q2 U.S. gross domestic product data on Friday and next week's July non-farm payrolls report. Recent U.S. economic data - including housing data - have been on the upswing and dealers are curious to determine if the improving U.S. data are coincident with a U.S. labour market that has already bottomed out. Data released in the U.S. today saw the May S&P/ Case-Shiller home price index was off 17.06% y/y, an improvement from the revised April print of -18.10%. Also, July consumer confidence fell to 46.6 from 49.3 in June while the the July Richmond Fed manufacturing index printed at 14, up from 6 in June. Another indication that the global credit crunch continues to thaw is a narrowing of the LIBOR-OIS spread, a measure of banks' reluctance to lend. The spread fell below 30 bps for the first time in eighteen months and is now at its lowest level since January 2003, far below the 364 bps level from 10 October 2008 when Lehman Brothers was failing as a viable financial institution. Effectively, the spread measures the premium banks charge over what traders are predicting the Federal Reserve's effective federal funds rate will average over the following three months. Prior to the beginning of the credit crunch in August 2007, the spread average about 11 bps in the five years leading up to the credit market dislocations. In eurozone news, the Centre for Economic Policy Research and Bank of Italy released their EuroCoin indicator today and it improved for the fifth consecutive month, lifting to -0.42 in July - the highest level since August. These data evidence an improvement in industrial production. CEPR also reported the economic recession bottomed out in the first quarter of the year when GD was off 2.5% q/q and 4.8% y/y. Notably, EMU-16 industrial production was up 0.5% m/m in May, the first improvement since August 2008, while the annual measure fell 17.0%, the smallest pullback since January 2009. Euro bids are cited around the US$ 1.3900 figure.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥94.40 level and was capped around the ¥95.25 level. The U.S. dollar onslaught continued as the greenback fell to its lowest level this year relative to six major currencies. The yen has also been on the defensive recently as improving equity markets have directed investment capital out of Japan and into higher-yielding international assets. The yen, however, shook off equities-supportive news that Deutsche Bank's net income rose to €1.09 billion from €649 million one year ago. Japanese exporters have been repatriating overseas assets recently as the yen has declined and the end of the month is near. The Nikkei 225 stock index lost 0.01% to close at ¥10,087.26. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥134.30 level and was capped around the ¥135.95 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥155.60 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥88.20 level. In Chinese news, the U.S. dollar gained ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8315 in the over-the-counter market, up from CNY 6.8283. The Chinese government yesterday called on the U.S. government to maintain a stable value of the U.S. dollar to protect China's massive holdings of U.S. government bonds. Chinese finance minister Zhu reported The Chinese government is responsible, and our responsibility is to the Chinese people. Of course, we are concerned about the safety of dollar assets. People's Bank of China today reported consumer prices are starting to stabilize and added inflation could reach bottom by the end of this quarter, also noting that economic growth was stronger in the second quarter than expected at an annualized 14.9% rate.

₤

The British pound climbed marginally vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6555 level and was supported around the $1.6455 level. Positive data were released by CBI today that noted the July monthly distributive trades retail sales balance improved to -15 from -17 in June. These data could suggest the worst of the retail slump has passed in the U.K. although economists note final private demand remains weak. Cable bids are cited around the US$ 1.6260 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8620 level and was capped around the ₤0.8645 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0655 level and was capped around the CHF 1.0715 level. Data released in Switzerland today saw the June UBS consumption indicator improve to 0.96 in June from a revised 0.75 in May. These data suggest final private demand is improving despite rising unemployment. Recent data have revealed manufacturing weakened at its slowest pace in eight months in June and leading economic indicators recently improved for the second consecutive month. Germany is also benefiting from an improvement in German business confidence that reached a nine-month high this month. U.S. dollar offers are cited around the CHF 1.0910 level. The euro came off vis-à-vis the Swiss franc as the common currency tested bids around the CHF 1.5220 level while the British pound fell vis-à-vis the Swiss franc as sterling tested bids around the CHF 1.7600 figure.