FOREX

EURO

The euro weakened vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4140 level and was capped around the $1.4200 figure.  Tradersdo not expect the European Central Bank to change monetary policytomorrow but will pay close attention to remarks from ECB PresidentTrichet.  Two key items that Trichet may commenton include the euro??™s recent appreciation and its implications foractual intervention versus the heightened verbal intervention thatEuropean officials have been brandishing lately. Also, traders want toknow if the ECB??™s policy bias has shifted from hawkish closer toneutral on account of the recent turmoil in the financial markets.  Any sense of hawkishness in Trichet??™s remarks could easily see a strong bid in the market for the euro.  In U.S. news, the September non-manufacturing ISM business index fell to 54.8 from 55.8 in August.  The new orders index fell back while the prices index for service posted strong growth to 66.1.  Thegreenback was pressured after ADP??™s National Employment Report noted58,000 private-sector jobs were added last month, up from a revised27,000 in August.  A significant amount of joblosses were cited in the housing, construction, and financial servicesindustries on account of the subprime mortgage meltdown in Q3.  Similarly, the Challenger layoff report ???pointed to a disturbing ramp up in financial services year-over-year layoffs.???  Manyeconomists are focusing on new jobs growth around 100,000 when theSeptember non-farm payrolls report is released on Friday.  Ineurozone news, EMU-13 August retail sales were up +0.1% m/m and +1.0%y/y, weaker-than-expected, while the EMU-13 September services PMIsurvey fell back to 54.2 from 58.0 in August. Euro bids are citedaround the US$ 1.4120/ 1.4055 levels.

JPN/CNY

The yen depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the ??116.70 level and was supported around the ??115.55 level.  Stopswere reached above the ??116.55 level, representing the 50.0%retracement of the move from ??109.00 to ??124.15 as the greenbackreached its strongest level since 27 August.  Traderscited increasing risk appetite and a renewal of the short yen carrytrade as two factors that led to intraday weakness in the yen.  Traders await remarks from Bank of Japan Deputy Governor Iwata overnight.  The Nikkei 225 stock index gained 0.90% to close at ??17,199.89.  Dollar bids are cited around the ??114.80 level.  The euro gained ground vis-? -vis the yen as the single currency tested offers around the ??165.30 level and was supported around the ??163.55 level.  The British pound and Swiss franc gained ground vis-? -vis the yen as the crosses tested offers around the ??237.80 and ??235.85 levels, respectively. In Chinese news, traders are speculating the U.S. dollar could weaken soon and trade with a CNY 7.4 handle.

STERLING

 
The British pound weakened vis-? -vis the U.S. dollar today as cable tested bids around the US$ 2.0340 level and was capped around the $ 2.0440 level.  Sterlinghas moved lower for three consecutive days and traders are very curiousto see how Bank of England Monetary Policy Committee??™s interest ratedecision materializes tomorrow.  The central banktook the rare step of not changing rates at their September meeting andreleasing a statement regarding their decision.  TheMPC is faced with the task of balancing concerns about inflationarypressures against growing signs the housing market and overall economyare cooling.  Most traders do not expect the MPCwill reduce interest rates tomorrow but could move closer to a neutralbias. Data released in the U.K. today saw the September services PMI survey fall to 56.7, its lowest print since August 2006.  Also, the BRC September shop price index was up 0.2% m/m and 0.4% y/y.  Thethree-month sterling Libor interbank rate scaled back to 6.24% todayfrom 6.26% yesterday while the overnight fixing rate remained steady at5.81%.  Cable bids are cited around the US$ 2.0270 level.  The euro moved highervis-? -vis the British pound as the single currency tested offers aroundthe ?‚¤0.6960 level and was supported around the ?‚¤0.6930 level.

SWISS