FX Update — USD
USD continues to trade mixed going into lunch with the USD Index holding onto marginal gains at 75.878 after trading briefly above 76 overnight. EUR/USD has been dancing around 1.50 for most of the day and is currently down 0.4% to 1.4940. ECB governor Klaus Liebscher’s attempts to jawbone EUR/USD higher via inflation warnings have had a limited impact, though may have prevented EUR/USD falling below 1.49 after bottoming out at 1.4907 overnight. Liebscher expects a protracted period of EU inflation above 2% and promises further inflation warnings going forward. EUR/USD continues to consolidate below 1.50 and with another test of 1.45 lingering in the near term.
Cable, down 0.4% to 1.9134, continues to come under pressure and is trading at its lowest level since the end of Nov-06. UK July PPI grew less then expected, though the y-o-y data remain alarmingly elevated, which has kept a negative tone on GBP today. Cable has now given back all of its ’07 gains and shows few signs of a breakout from its recent deterioration.
USD/JPY, down 0.7% to 110.11, has taken back a good portion of its losses in response to the modest rally in equities going into lunch. USD/CHF, up 0.12% to 1.0863, has just turned positive after spending most of the overnight session in the red.