The euro moved marginally lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3925 level and was capped around the $1.4025 level. Liquidity was light ahead of the long Independence Day holiday weekend. The European Central Bank voted yesterday to keep monetary policy unchanged and ECB President Trichet's remarks indicate interest rates may be on hold for some time in the eurozone. Commercial banks' overnight deposits at the ECB rose to a new 5 ½-month high overnight as banks hoarded most of last week's injection of liquidity by the ECB that amounted to nearly €500 billion. Some €403.3 billion was on deposit overnight at the ECB, suggesting banks are awash in liquidity but are reluctant to lend. Data released in the eurozone today saw May retail sales fall 0.4% and 3.3% y/y, worse-than-expected, while the June EMU-16 purchasing managers' composite survey improved to 44.6 from 44.0 in May - albeit still a contraction below the boom-or-bust 50.0 level. ECB member Noyer said policymakers should remain focused on keeping prices stable. In U.S. news, the markets will reopen on Monday after the holiday weekend. Yesterday's U.S. economic data saw June non-farm payrolls collapse by a worse-than-expected 467,000 with the unemployment rate now at 9.5%. Many economists believe the unemployment rate could reach the psychologically-important 10.0% level during the current economic contraction. Euro bids are cited around the US$ 1.3435 level.

¥/ CNY

The yen depreciated marginally vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.10 level and was supported around the ¥95.70 level. Liquidity was reduced with most U.S. desks closed for the Independence Day weekend celebration. The Ministry of Finance named Tomoyuki Furusawa as the new head of its currency division but most MoF-watchers do not believe this will lead to a major change in currency policy. The yen has recently traded in an inverse manner to the performance of global equities markets. Declining risk appetite has oftentimes resulted in an appreciation in the yen. Bank of Japan will convene its quarterly meeting of branch managers on Monday and many Japanese data will be released during the week. Traders await further indications that Japan's economy may be improving including better industrial production and factory output data, along with a turnaround in the weak labour market. The Nikkei 225stock index lost 0.61% to close at ¥9,816.07. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥134.80 level and was supported around the ¥133.55 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥156.40 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.90 level. In Chinese news, the U.S. dollar moved higher vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8315 in the over-the-counter market, up from CNY 6.8304.

 £

The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6300 figure and was capped around the $1.6430 level. Bank of England's Monetary Policy Committee convenes next week and is not expected to change monetary policy at this time. Data released in the U.K. today saw the June CIPS PMI services survey decline to 51.6 from 51.7 in May. Some economists believe the U.K. economy will emerge from recession this quarter but it is unlikely that policymakers will unwind their massive monetary and fiscal stimuli anytime soon. It was also reported today that U.K. residents added ₤8.1 billion to their housing equity in Q1, up from ₤7.8 billion in Q4. Cable bids are cited around the US$ 1.6180 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8585 level and was supported around the ₤0.8515 level.

CHF

The Swiss franc came off vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0900 figure and was supported around the CHF 1.0830 level. Data released in Switzerland today saw the June consumer price index rise 0.2% m/m and decline 1.0% y/y. Many traders suspect the Swiss National Bank has been intervening in the market by selling francs to weaken the domestic currency. SNB Directorate member Jordan yesterday indicated we continue to consider interventions to prevent an excessive rise in the Swiss franc. SNB Vice President Hildebrand said the Swiss economic recovery may lag the global recovery because Switzerland was impacted later than many countries. Hildebrand suggested the global economy is no longer in a free-fall. U.S. dollar offers are cited around the CHF 1.1165 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5250 level while the British pound came off vis-à-vis the Swiss franc and tested bids around the CHF 1.7725 level.