WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
20 July 2008

Sunday 

_____________________________________________________________________
GCI Foreign Exchange Research:        www.gcitrading.com/fxnews/
FX Research Desk:                                fxnews@gcitrading.com
_____________________________________________________________________

€

The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.5785 level and was capped around the $1.6040 level. The pair lost about 90 pips last week.  The U.S. government bailed out Fannie Mae and Freddie Mac with a “liquidity backstop” and will purchase shares in them if needed. Bernanke cited a “critical” need to keep inflation expectations in check and said a “top priority” is normal market functioning. The Fed sees 2008 GDP growth of 1.0% to 1.6% with core inflation at 2.2% to 2.4%. Sovereign wealth funds are said to have reduced US$ exposure. FOMC meeting minutes revealed policymakers believed “some firming in policy would be appropriate very soon.” The greenback rallied on lesser-than-expected losses by Citigroup in Q2.

ECB’s Constancio sees EMU-15 Q2 GDP growth slowing. The German government cautioned of an “exaggerated” pullback in Q2 GDP growth. ECB’s Wellink warned long-term inflation expectations must be weakened. ECB’s Trichet said GDP growth is likely to be weak in Q2 and Q3 and improve.

Data released in the U.S. last week saw June headline PPI up 1.8% m/m and 9.2% y/y with the core rate up +0.2% m/m and +3.0% y/y; the core PPI rate was up +0.2% and +3.0% y/y; June advance retail sales were up +0.1% on the headline and +0.8% at the ex-transportation level; the July Empire State manufacturing index improved to -4.98 from -8.68 in June; May business inventories were up 0.3%; June core CPI was up 0.3% m/m and 2.4% y/y; June average weekly earnings were off 0.9% m/m and 2.4% y/y; June industrial production was up 0.5% with capacity utilization up to 79.9%; net foreign purchases of long-term U.S. securities fell to US$ 44.4 billion; weekly initial jobless claims were up 18,000 to 366,000 with continuing jobless claims off 81,000 to 3.122 million; July housing starts were up 9.1% to an annualized 1.066 million; June building permits were up 11.6%; and the Philadelphia Fed manufacturing survey improved to -16.3.

Data released in the eurozone last week saw EMU-15 April industrial production was off 1.9% m/m and 0.6% y/y; German August ZEW economic expectations fell to -63.9 from -52.4 in July; EMU-15 June CPI jumped to 4.0%; German final June CPI was up 0.3% m/m and 3.3% y/y; the EMU-15 May trade balance printed at -€4.6 billion; and German PPI was up 0.9% m/m and 6.7% y/y.

Technical Outlook

Last week’s high (1) was a new lifetime high and last week’s low (2) was above the 38.2% retracement of the 1.4309-1.6038 range.  The 1.5903/ 1.6018/ 1.6122 levels represent upside resistance targets while the 1.5837/ 1.5650/ 1.5563/1.5456/ 1.5285 levels represent downside support targets.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥107.10 level and was supported around the ¥103.75 level.  The pair gained about 60 pips last week. The Nikkei 225 stock index lost 0.65% on Friday to close at ¥12,803.70.  Economy czar said the economy “is in a flat trend that is barely holding” while the government kept its assessment unchanged in July, reporting “business conditions have deteriorated.” BoJ kept its overnight call rate unchanged at 0.50% and Shirakawa pledged “flexible” monetary policy. The BoJ cut its GDP growth forecast to 1.2% - 1.5% and upped its core CPI growth forecast to 1.8%.  BoJ also downgraded its views on exports, production, and housing investment. The government is expected to reduce its current FY GDP forecast to 1.3% this week. The government warned it may be difficult to balance its public finances by FY 2011-2012. Shirakawa sees the economy avoiding a “deep adjustment” and said the “balance is 50-50” towards boosting economic growth and slowing inflation.

Data released in Japan this week saw the May tertiary index fall 0.2% m/m.

In Chinese news, the Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8169 in the over-the-counter market, down from CNY 6.8340.  The government denied a rumour it will try to slow the yuan’s appreciation. The government sees H2 GDP growth decelerating.

Data released in China last week saw the M2 money supply up 17.3% at the end of June; foreign reserves were US$ 1.8088 trillion at the end of June; Q2 GDP was up 10.1% y/y; June PPI was up 8.8% y/y; June CPI was up 7.1% y/y; H1 industrial output was up 16.3% y/y; H1 retail sales were up 21.4% y/y; and the June property climate index fell to 103.08.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 95.71-108.56 range and last week’s low (2) was right around the 38.2% retracement of the same range. Upside resistance targets remain the 107.15/ 108.56/ 110.18/ 112.66/ 114.65 levels while downside support targets remain the 105.18/ 103.44/ 102.42/ 100.18 levels.

₤

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 2.0155 level and was supported around the $1.9810 level.  The pair gained about 95 pips last week.  BoE’s King sees CPI above 3.0% well into 2009 and returning to 2.0% in two years.  New BoE Chief Economist Dale sees “substantially higher” CPI over the coming months and warned longer-term inflation expectations need to be anchored. MPC’s Sentance expressed concern with the speed of inflation’s ascent. MPC’s Gieve said CPI is likely “to be well over 4 per cent for much of the rest of the year.” The U.K. government may release its fiscal rules to allow more borrowing.

Data released in the U.K. last week saw May input prices rise 2.1% m/m and 30.0% y/y; headline May output prices were up 0.9% m/m and 10.0% y/y with core output up 0.3% m/m and 6.3% y/y; June CPI jumped to 3.8% from 3.3%; 88% of RICS June house price respondents saw lower house prices; BRC June retail sales fell; the June claimant count of unemployment rose 15,500 with average earnings including bonus up 3.8% in the three months to May;  CML mortgage lending was at its weakest since 2006; and June net borrowing rose to ₤9.2 billion.

Technical Outlook

Last week’s high (1) was right around the 76.4% retracement of the 2.0396-1.9364 range and last week’s low (2) was above the 38.2% retracement of the same range.  Upside resistance targets include the 2.0033/ 2.0248/ 2.0463 levels while downside support targets include the 1.9767/ 1.9602/ 1.9395 levels.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.0255 level and was supported around the CHF 1.0010 level. The pair gained about 65 pips last week.  SNB encouraged banks to recapitalize their balance sheets.

Data released in Switzerland last week saw May retail sales climb 9.3% and the July ZEW economic expectations index fell to -76.9 from -63.8.

Technical Outlook

Last week’s high (1) was right around the 38.2% retracement of the 0.9647-1.0623 range and last week’s low (2) was right the 61.8% retracement of the same range.  Upside resistance targets include the 1.0250/ 1.0393/ 1.0623/ 1.0850/ 1.1134 levels while downside support targets include the 1.0135/ 1.0020/ 0.9877/ 0.9647/ 0.9605 levels.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 0.9975 level and was capped around the C$ 1.0140 level.  The pair lost about 25 pips last week.  Bank of Canada kept its benchmark lending rate unchanged at 3.0% and cited “significant upside and downside risks” while noting the economy is in “slight excess supply.”  BoC sees GDP growth around 1.0% this year and a temporary move in inflation above 4.0%.

Data released in Canada last week saw May manufacturing shipments up 2.7%; foreign investment in Canadian securities rose to C$ 10.717 billion in May; May wholesale sales rose 1.6% m/m; and the June leading index climbed 0.2% m/m.

Technical Outlook

Last week’s high (1) was just above the 61.8% retracement of the 1.0378-0.9709 range and last week’s low (2) was right around the 38.2% retracement of the same range.  Upside resistance targets include the 1.0202/ 1.0378/ 1.0439/ 1.0797 levels while downside support targets include the 1.0069/ 0.9965/ 0.9867/ 0.9752 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.9850 level and was supported around the US$ 0.9660 level.  The pair gained about 45 pips last week. RBA July meeting minutes revealed concern that Q2 inflation would be significantly above 1.0% but policymakers decided rates are high enough at 7.25%.  Policymakers expect a slowdown in consumer spending and the labour markets.  RBA boss Stevens sees a “more moderate track for demand.”

Data released in Australia last week saw May personal finance off 7.8% m/m; June imports fell to A$ 17.5 billion; and Q2 export prices were up 17.5% q/q.

Technical Outlook

Last week’s high (1) was a new multi-decade high and last week’s low (2) was above the 23.6% retracement of the 0.7673-0.9667 range.  Upside resistance targets include the 0.9851/ 0.9920/ 1.0053/ 1.0367 levels while downside support targets include the 0.9533/ 0.9431/ 0.9394/ 0.9263/ 0.9120/ 0.9003/ 0.8887 levels.

SCHEDULE

Sunday, 20 July 2008

all times GMT

(last release in parentheses)

2301     UK                    July Rightmove house prices (-1.2% m/m)

2301     UK                    July Rightmove house prices (0.1% y/y)

Monday, 21 July 2008

all times GMT

(last release in parentheses)

0130     Australia           Q2 producer price index (1.9% q/q)

0130     Australia           Q2 producer price index (4.8% y/y)

0300     NZ                    June credit card shopping (5.9% y/y)

0700     CH                    June M3 money supply (2.6% y/y)

0715     CH                    June producer and import prices (1.2% m/m)

0715     CH                    June producer and import prices (3.9% y/y)

1400     US                    June leading indicators (0.1%)

2350     Japan                May all-industry activity index (0.8% m/m)

Tuesday, 22 July 2008

all times GMT

(last release in parentheses)

0615     CH                    June trade balance (CHF 1.87 billion)

1230     Canada             May retail sales (0.6% m/m)

1230     Canada             May retail sales, ex-autos (1.1% m/m)

1400     US                    July Richmond Fed manufacturing index (-12)

1400     US                    May house price index (-0.8% m/m)

Wednesday, 23 July 2008

all times GMT

(last release in parentheses)

0100     Australia           July DEWR skilled vacancies

0130     Australia           Q2 consumer price index (1.3% q/q)

0130     Australia           Q2 consumer price index (4.2% y/y)

0645     France              June consumer spending (2.0% m/m)

0645     France              June consumer spending (3.1% y/y)

0800     Italy                  May retail sales (0.0% m/m)

0800     Italy                  May retail sales (-2.3% y/y)

0830     UK                    Bank of England Monetary Policy Committee meeting minutes

0830     UK                    June BBA loans for house purchase

0900     Eurozone          May industrial new orders (2.5% m/m)

0900     Eurozone          May industrial new orders (11.7% y/y)

1100     US                    MBA mortgage applications

1100     Canada             June consumer price index (1.0% m/m)

1100     Canada             June consumer price index (2.2% y/y)

1100     Canada             June Bank of Canada CPI (0.3% m/m)

1100     Canada             June Bank of Canada CPI (1.5% y/y)

1300     Canada             Federal Reserve Governor Mishkin speaks

1515     US                    Federal Reserve Vice Chairman Kohn speaks

1800     US                    Federal Reserve Beige Book

2100     NZ                    Reserve Bank of New Zealand interest rate decision

2350     Japan                June merchandise trade balance (¥365 billion)

Thursday, 24 July 2008

all times GMT

(last release in parentheses)

0645     France              July business confidence (102)

0645     France              July production outlook

0730     Germany           July PMI, manufacturing (52.6)

0730     Germany           July PMI, services (52.1)

0800     Germany           July Ifo, business climate (101.3)

0800     Germany           July Ifo, expectations (94.7)

0800     Eurozone          July PMI, manufacturing (49.2)

0800     Eurozone          July PMI, services (49.1)

0800     Eurozone          May current account (-€300 million)

0830     UK                    June retail sales (3.5% m/m)

0830     UK                    June retail sales (8.1% y/y)

1230     US                    Weekly initial jobless claims (366,000)

1230     US                    Continuing jobless claims (3.122 million)

1400     US                    June existing home sales (4.99 million)

1400     US                    June existing home sales (2.0% m/m)

1400     US                    New York Federal Reserve President Geithner testifies

2330     Japan                July Tokyo-area consumer price index (1.5% y/y)

2330     Japan                July Tokyo-area CPI, ex-food, energy (0.3% y/y)

2330     Japan                National consumer price index (1.3% y/y)

2330     Japan                National CPI, ex-food, energy (-0.1% y/y)

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                Japanese purchases of foreign equities and bonds

2350     Japan                June corporate service prices (0.6% y/y)

Friday, 25 July 2008

all times GMT

(last release in parentheses)

0800     Eurozone          July M3 money supply (10.4%)

0800     Eurozone          July M3 money supply (10.5% y/y)

0830     UK                    Q2 GDP (0.3% q/q)

0830     UK                    Q2 GDP (2.3% y/y)

0830     UK                    May index of services (0.3%)

1230     US                    June durable goods orders (0.0%)

1230     US                    June durable goods orders, ex-transportation (-0.9%)

1400     US                    July University of Michigan consumer sentiment (56.6)

1400     US                    June new home sales (512,000)

1400     US                    June new home sales (-2.5% m/m)

DISCLAIMER: GCI’s Weekly Market Recap and Week Ahead is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

 Click here to ***.