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The euro came off marginally vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.2650 level and was capped around the $1.2725 level. Technically, today??™s intraday low was right around the 50% retracement of the move from $1.3665 to $1.1640. Data released in the U.S. today saw August wholesale prices moderate and print up +0.1% m/m with core inflation off 0.4% following July??™s -0.3% decline. The decline in gasoline prices saw producer prices pull back and this represented the first consecutive monthly declines in core inflation in more than three years. Other data released today saw housing starts fall a more-than-expected 6% to an annual pace of 1.665 million units. These latest housing data suggest the Fed??™s continued rate hikes this year may be having a larger impact on the U.S. housing market than previously believed. The Federal Open Market Committee meets tomorrow to deliberate U.S. interest rates and while no change in rates is expected, many traders would not be surprised if the Fed takes the federal funds rate higher. In eurozone news, the German ZEW investor confidence survey fell sharplythis month to -22.2, its weakest print in some eight years. European Central Bank officials spoke today with Quaden reiterating they will remain vigilant on inflation and Liikanen reported the central bank must remain vigilant on inflation and act when necessary. ECB??™s Tumpel-Gugerell yesterday said she expects a ???normalization??? of EMU-12 growth in Q3. An unnamed eurozone official was also quoted yesterday as saying interest rates could reach 4% in 2007 if growth remains strong. Euro bids are cited around the US$ 1.2560 level.

??/ CNY

The yen appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the ??117.05 level and was capped around the ??118.10 level. Stops were hit below the ??117.25 level, representing the 23.6% retracement of the move from ??113.95 to ??118.30. The yen gained ground after a European monetary official indicated the markets need time to understand the signal from the Group of Seven this weekend that a stronger yen is desirable in relation to the euro. Most traders note the G7 did not explicitly mention this. Senior Japanese finance ministry official Akaba talked down interest rates today saying he doesn??™t see ???much inflationary concern on the horizon so an immediate rise in interest rates is not the right way as I see it.??? Data released in the eurozone today saw August department store sales fall 0.9% y/y while land prices in Japan??™s three largest cities rose for the first time in sixteen years. The Nikkei 225 stock index climbed 0.05% to close at ??15,874.28. Dollar bids are cited around the ??116.65/ 15 levels. The euro came off vis-? -vis the yen as the single currency tested bids around the ??148.60 level and was capped around the ??150.25 level. The British pound and Swiss franc depreciated vis-? -vis the yen as the crosses tested bids around the ??220.80 and ??93.45 levels, respectively. The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.9363 in the over-the-counter market, down from CNY 7.9468, and at CNY 7.9348 in the exchange-traded market, an all-time high. U.S. Treasury Secretary Paulson arrived in China today and will meet with senior Chinese officials this week to discuss that country??™s massive trade surplus with the U.S. that reached US$ 202 billion in 2005. Some U.S. officials are pressing China to liberalize its foreign exchange regime faster than it is currently doing. Paulson is unlikely to overtly pressure the Chinese but will make it known that China is making the right moves as far as liberalization of its FX regime is concerned. People??™s Bank of China Governor Zhou talked today and reiterated China??™s economy growth remains strong and policies designed to boost domestic consumption ???has produced positive effects.??? Zhou also indicated ???inflation is moderating.???

?‚¤

The British pound jumped higher vis-? -vis the U.S. dollar today as cable tested offers around the US$ 1.8885 level and was supported around the $1.8775 level. Stops were hit above the $1.8445 level, representing the 50% retracement of the move from $1.9090 to $1.8600. Bank of England Monetary Policy Committee member Barker was quoted as saying ???House prices are rising faster than earnings, and I have to say that's a surprise. In the very long run, it is difficult to think of house price growth being perpetually above earnings, unless there's something else going on, like a constraint on supply. We've got growth at, or slightly above (the long-term average). This doesn't seem like a situation where what you're most worried about is growth falling away. So the risk that inflation in the autumn would have a more significant effect on wage setting was what lay behind the August rate rise.??? Sterling jumped on the premise that MPC officials may decide to lift borrowing costs further this year. Cable bids are cited around the US$ 1.8790 level. The euro fell vis-? -vis the British pound as the single currency tested bids around the ?‚¤0.6725 level and was capped around the ?‚¤0.6760 level.

CHF

The Swiss franc moved marginally higher vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.2480 level and was capped around the CHF 1.2570 level. Chartists are eyeing the CHF 1.2470/ 25 levels as the pair??™s next downside targets. August trade balance data will be released on Thursday. Dollar offers are cited around the CHF 1.2685 level. The euro came off marginally vis-? -vis the Swiss franc as the single currency tested bids around the CHF 1.5875 level while the British pound moved higher vis-? -vis the Swiss franc and tested offers around the CHF 2.3635 level.

AUD

The Australian dollar gained marginal ground vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7560 level and was supported around the CHF 1.2480 level. Technically, today??™s intraday low was right around the 38.2% retracement of the move from US$ 0.6770 to $0.7985. Australian dollar bids are cited around the $0.7500 figure.

CAD

The Canadian dollar depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the C$ 1.1230 level and was supported around the C$ 1.1170 level. Data released in Canada today saw August consumer prices rise 2.1% y/y, down from July??™s 2.4% rise. This moderation in inflationary pressures will reduce expectations for additional Bank of Canada monetary tightening in 2006. U.S. dollar offers are cited around the C$ 1.2685 level.

NZD

The New Zealand dollar fell marginally vis-? -vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6595 level and was capped around the $0.6645 level. New Zealand dollar offers are cited around the US$ 0.6685 level.

Gold/ Silver

Gold depreciated vis-? -vis the U.S. dollar today as the yellow metal tested bids around the US$ 579.95 level and was capped around the $589.25 level. Gold traders await tomorrow??™s FOMC interest rate decision. Silver slumped vis-? -vis the U.S. dollar as the pair tested bids around the $10.88 level and was capped around the $11.22 level.

Crude Oil

Crude oil jumped vis-? -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for November delivery tested offers around the US$ 65.04 level and was supported around the $64.21 level. Prices were pushed higher after British Petroleum announced production at its large Thunder Horse oilfield in the Gulf of Mexico will be pushed back until 2008. Traders are also paying close attention to speeches from the U.S.??™s and Iran??™s presidents at the United Nations today.