Kamal Sharma, currency strategist at Bank of America says "What we're really having to contend with at the moment is how central bank rhetoric and economic data is challenging market expectations for monetary tightening by the end of the year in the U.S. and euro area. Over the near term, we think euro/dollar is likely to be a tug of war between competing central bank rhetoric."

Crude oil rebounds to a gain of 0.5% at $134.70 per barrel, after being down as much as 1.6%. Meanwhile, the S&P 500 falls to a fresh session low, with all ten economic sectors in negative territory.
The worst-performing industry groups are regional banks (-6.1%), auto manufacturing (-5.1%) and tires & rubber (-4.0%). The best-performing groups are coal & consumable fuels (+3.2%), railroads (+1.4%) and brewers (+1.2%).

The dollar was steady on Wednesday as investors adjusted their interest rate outlooks for the United States and the euro zone after conflicting economic data and monetary authorities toned down threats of tighter policy.Competing central bank rhetoric was likely to make trading conditions more volatile in the days ahead, analysts said.
The dollar rose to near a four-month high against the yen on bets the Federal Reserve will increase borrowing costs later this year while the Bank of Japan holds its target at the lowest level among major economies.
Japan's currency weakened as the Bank of Japan's policy meeting minutes from May indicated ``considerable downside risks.'' China's yuan advanced to the strongest since a dollar link ended in 2005 as the central bank's Governor Zhou Xiaochuan said the currency ``will have to rise'' because a weakening dollar will drive up commodity prices.
The pound may fall to a record low against the euro in the next three months on speculation the Bank of England will resist raising interest rates amid quickening inflation because growth is flagging, HBOS Plc said.
The U.K. currency, which slid the most in two weeks yesterday, may drop to 81 pence per euro as investors trim bets the central bank will lift borrowing costs, said Naeem Wahid, a strategist in London at Britain's largest mortgage lender. The pound fell to 80.99 pence on April 16, the lowest level since the euro was introduced in 1999.

A net 18% of managers said gold was overvalued in June, versus 29% who had that viewin May.
A net 60% said oil was overvalued at current levels, compared to 52% in May.

Portfolio managers were asked which currency they expected to rise/fall the most on a trade-weighted basis over the next 12 months.
In June, a net 39% ofmanagers looked for the dollar to rise, a net 48% expected the euro to fall and a net 15% looked for the yen to rise.
Last month, a net 31% ofthose polled expected the dollar to rise, a net 50% saw the euro fallingand a net 20% looked for the yen to rise.

The major indices bounce off their session lows, although losses remain steep. Crude is down 1.2% to $132.43 per barrel after trading in choppy fashion following the government's weekly energy report.
The DJ Transportation Average is up 0.6%, despite weakness in FedEx (FDX 82.00, -2.33) and UPS (UPS 65.86, -1.48). Union Pacific (UNP 75.95, +3.48) is leading the way. The rail company cut its second quarter earnings forecast due to the Midwest storms, but the lower profit estimate was better than feared. Meanwhile, trucking company YRC Worldwide (YRCW 18.12, +1.35) is up 8% after reaffirming its second quarter guidance.

On the earnings front, FedEx (FDX 82.14, -2.19) issued fiscal year 2009 earnings guidance well below expectations, citing sluggish demand and record energy prices. The Tennessee-based company's earnings missed analyst expectations for its latest quarter.

Morgan Stanley (MS 39.14, -1.45) reported a 61% year-over-year drop in second quarter earnings per share, but that was good enough to top expectations. However, shares are under pressure after revenue fell well short of estimates.

One day after Goldman Sachs said U.S. banks may need to raise as much as $65 billion in additional capital, regional bank Fifth Third Bancorp (FITB 10.99, -1.75) announced plans to shore up its balance sheet. Specifically, the Ohio-based bank is going to raise $1 billion in fresh capital, sell $1 billion in assets and cut its quarterly dividend by 66% to $0.15 per share.

Financials fell 2.5%, hitting their lowest level since 2003. Just before the midday mark, the sector pared its loss to only 0.5%. Goldman Sachs (GS 182.93, +3.49) is aiding in the recovery effort, as the stock rises in response to several postive brokerage comments.

Although weakness is broad-based with nine of the ten economic sectors in the red, not all corporate news was negative.

Shares of pharmaceutical giant Pfizer (PFE 18.12, +0.40) are up 2.3% after the company reached a settlement with Ranbaxy Laboratories over the sale of generic versions of the cholesterol drug Lipitor. Under the agreement, Pfizer will not face generic competition until November 2011 -- an extra 20 months. The agreement will have a significant impact on Pfizer's earnings, considering in 2007 Lipitor -- the world's best selling drug -- accounted for $12.6 billion of Pfizer's $48.4 billion in revenue.

"central bankers have toned down their rhetoric in the past week, probably in order to contain rate hike expectations. This supports our view that markets have priced in too many rate hikes from major central banks this year, with the ECB the notable exception."

WTI Nymex crude oil is lower following US DOE weekly inventory data, which showed crude oil inventory fell less than expected at 1.2mln barrels and gasoline demand -1.8% vs same period last year. WTI Nymex crude oil is at $133.40 down 61 cents.

The major indices open in negative territory on disappointing earnings and further signs that the financial market turmoil is not over.
On the earnings front, FedEx (FDX 82.44, -1.94) issued fiscal year 2009 earnings guidance well below expectations, citing sluggish demand and record energy prices. The Tennessee-based company's earnings missed analyst expectations for its latest quarter.
Morgan Stanley (MS 38.19, -2.40) reported 61% year-over-year drop in second quarter earnings per share, but that was good enough to top expectations. However, shares are under pressure after revenue fell well short of estimates.
One day after Goldman Sachs said U.S. banks may need to raise as much as $65 billion in more capital, regional bank Fifth Third Bancorp (FITB 10.91, -1.82) announced plans to shore up its balance sheet. Specifically, the Ohio-based bank is going to raise $1 billion in fresh capital, sell $1 billion in assets and cut its quarterly dividend by 66% to $0.15 per share.

00:30 Australia Westpac Leading Index (MoM) (Apr) 0,2% 0.4%
05:00 Japan Leading indicators (April) final 30,0 30.0
05:00 Japan Coincident indicators (April) final 22,2 27.3
08:30 UK BoE meeting minutes (04-05.06)
10:00 UK CBI industrial order books balance (June) -10% +1%

The U.S. currency also snapped two days of declines versus the euro after European Central Bank council member Yves Mersch said the bank hasn't signaled it's about the embark on a series of interest-rate increases.
U.K. pound stayed lower against the dollar and euro after minutes from the Bank of England's June meeting showed policy makers voted 8-1 to keep its benchmark interest rate unchanged. Policy maker David Blanchflower voted for a quarter-point cut, arguing evidence of slowing growth ``more than outweighed'' the news about short-term inflation.

EUR/USD: traded within $1.5460-$1.5536 range.Bids $1.5460, offers $1.5540/60.
GBP/USD: fell from $1.9580 to $1.9470 before bounced back to $1.9530. Cable bids $1.9470, $1.9410/00, offers $1.9560/70.
USD/JPY: tested offers on approach to Y108.40/50 before fall back to Y108.10. Offers Y108.50/60, offers Y108.90/00

The pound may fall to a record low against the euro in the next three months on speculation the Bank of England will resist raising interest rates amid accelerating inflation because growth is flagging, HBOS Plc said.

Stock futures suggest a negative start to the trading day (S&P futures vs fair value: -10.3 Nasdaq futures vs fair value: -14.5). Shares of FedEx (FDX) are under pressure in premarket trading after the company reported lower than expected earnings, and issued full year guidance that is well below expectations. Fifth Third Bancorp (FITB) announced its is raising $1 billion in capital and cutting its dividend in an effort to shore up its balance sheet. Morgan Stanley (MS) reported a 61% year-over-year drop in second quarter earnings per share, but that was good enough to top expectations. Crude oil is trading up 0.4% ahead of the governments weekly energy report.

The dollar rose against the yen as oil fell for a fourth day and rising stocks encouraged investors to buy higher-yielding assets financed in Japan.
The U.S. currency also snapped two days of declines versus the euro after European Central Bank council member Yves Mersch said the bank hasn't signaled it's about the embark on a series of interest-rate increases.
U.K. pound stayed lower against the dollar and euro after minutes from the Bank of England's June meeting showed policy makers voted 8-1 to keep its benchmark interest rate unchanged. Policy maker David Blanchflower voted for a quarter-point cut, arguing evidence of slowing growth ``more than outweighed'' the news about short-term inflation.
The pound may fall to a record low against the euro in the next three months on speculation the Bank of England will resist raising interest rates amid accelerating inflation because growth is flagging, HBOS Plc said.
``The yen is playing the path of least resistance to seeing dollar strength,'' said Adam Cole, head of global currency strategy at Royal Bank of Canada in London. ``Euro-dollar remains in a range as both the European Central Bank and the Federal Reserve sound hawkish.''
Crude oil for July delivery traded at $133.79 a barrel on the New York Mercantile Exchange, down a fourth day and $6.90 below its record high of $139.89 reached on June 16.
The correlation of the dollar against the euro and oil prices is minus 0.93 for the past year, according to Bloomberg calculations based on value changes, indicating they have moved in the opposite direction 93 percent of the time.

Extending highs on the day as the greenback finds favour
across the board, dollar-yen breaking through reported demand at Y108.30
and now approaching Tuesday's high at Y108.40. Stronger offers noted at
Y108.60.

Resistance 3: Y110.00

Resistance 2: Y109.20
Resistance 1: Y108.60
Current price: Y108.29
Support 1: Y107.60

Support 2: Y106.50

Support 3: Y106.20

Comments: Dollar remains between the Y107.60/Y108.60 range (support and resistance respectively). Above Y108.60 (Monday’s high), further level comes at Y109.20. Rise above may extend to Jan 10 high on Y110.00/10. Below Friday’s lows on Y107.60, support is around Y106.50. Below correction may reach Y106.20.

Cable refreshed lows for the day under $1.9500 mark. Offers noted in the $1.9470 area, in line with Tuesday's low. Stops at risk below there, which if triggered would expose demand placed around this month's base in the $1.9400 zone.

Median forecastы implie a decline in total orders balance to -12 from -10 in May. This compares to -13 in April, which was an 18-month low. The risk is perhaps on a weaker data considering the rise in energy prices and weaker global demand.

Resistance 3: Chf1.0620

Resistance 2: Chf1.0520
Resistance 1: Chf1.0460
Current price: Chf1.0446

Support 1: Chf1.0370

Support 2: Chf1.0320

Support 3: Chf0.0260

Comments: Techs on dollar hasn’t changed with support comes at yesterday’s lows on Chf1.0370, then – on Chf1.0320. Below losses may widen to Chf1.0260. Resistance comes at Monday’s highs on Chf1.0460 with a break above will point to Chf1.0520. Above there is a chance for a rise up to Chf1.0620 (May 0 high).

Resistance 3: $1.9800
Resistance 2: $1.9700
Resistance 1: $1.9580
Current price: $1.9503
Support 1: $1.9470
Support 2: $1.9400
Support 3: $1.9360

Comments: Cable still under pressure, despite some recovery around yesterday’s lows on $1.9470 with a break under will open the way to $1.9400 (Last Friday’s low) and then – to May 15 lows on $1.9360. Minor resistance is around hourly high on $1.9580. Stronger level comes at yesterday’s high on $1.9700, then – near Jun 09 on $1.9800.

Resistance 3:$1.5820
Resistance 2: $1.5660
Resistance 1: $1.5550
Current price: $1.5488

Support 1: $1.5460
Support 2: $1.5340
Support 3: $1.5300

Comments: Euro continues to weaken with resistance comes at Jun 17 highs on $1.5550, then – at $1.5660. Stronger level is around $1.5820. Strong support comes at yesterday’s low on $1.5460, then – on $1.5340 with a break under will open the way to $1.5300 (Friday’s low).

According to MPC’s minutes, some members say new data enough to consider immediate rate hike. They say high med term infl. expectations could justify hike. Eight members voted for unchanged rates and arch dove David Blanchflower backing a 25 basis point cut.

1.Austrian growth to slow to 1.7% in 2009
2.Austrian growth to pick up again to 2.4% in 2010
3.Euro helping to damp food, oil price surge

EUR
Bids: $1.5465/60, $1.5450
Offers: $1.5530, $1.5550/60

JPY
Bids: Y107.85/80, Y107.60/50
Offers: Y108.40, Y108.60, Y109.00

GBP
Bids: $1.9500, $1.9470, $1.9400
Offers: $1.9580/1.9600, $1.9700

1.ECB will do everything to anchor inflation expectations
2.Medium-term price stability risks have risen
3.EMU HICP above 3% in 2008, to decline only gradually

The dollar traded near a one-week low against the euro as investors bet the Federal Reserve will keep interest rates unchanged next week and the European Central Bank will increase borrowing costs next month.
The U.S. currency was also near its lowest in a week against the yen after reports in the U.S. yesterday showed housing starts fell in May to a 17-year low and industrial production unexpectedly declined.

EUR/USD printed lows around $1.5473 before it rebounded to current $1.5509.
GBP/USD fell from $1.9580 to $1.9502. Later rate went back to $1.9522.
USD/JPY rose from Y107.80 to Y108.11.

The British pound fell before the release today of minutes from the most recent Bank of England meeting. The BOE will release today minutes from a June 5 meeting at which it kept borrowing costs on hold at 5%. The pound fell yesterday after central bank Governor Mervyn King predicted inflation will exceed 4% this year.

Japan's benchmark stock indices ended Wednesday's session higher across the board, although just shy of the session's best levels. The benchmark Nikkei 225 was ahead by 104.45 points, or 0.73%, at 14452.82. The broader-based TOPIX was ahead by 7.66 points at 1409.64.

Stock market fixing:
Nikkei -6.00 -0.04% 14,348.37
Topix +0.29 +0,02% 1,401.98
FTSE +67.30 +1.16% 5,861.90
DAX +66.28 +0.98% 6,796.16
CAC +28.59 +0.61% 4,686.33
Dow -108.78 -0.89% 12,160.30
NASDAQ -17.05 -0.69% 2,457.73
S&P -9.21 -0.68% 1,350.93
10yr Note -0.2000 -0.047% 4.225%
NYMEX Crude Oil -0.60 -0.45% 134.01
Gold +0.60 +0.07% 886.90

In Japan, share markets were subdued. The yen strengthened, moving away from its weakest level in four months of Y108.58 that was hit on Monday.
Steelmakers fell as two of the sector’s biggest companies, Kobe Steel and JFE, were downgraded by Mizuho Securities. Kobe sank by 2.7% to Y327 and JFE fell by 1.0% to Y5,760.
Tokyo Electric, the country’s biggest power producer, gained 1% as the cost of crude dropped, and the fall also helped shipping lines. They were battered badly last week as the surge in crude raised fears that demand for sea transport, especially of bulk goods, would fall. Mitsui OSK rose by 2.5%, Kawasaki Kisen Kaisha gained 1.3% and Nippon Yusen KK was up 0.9%.

European stocks rose to a one-week high after oil retreated, Goldman Sachs Group Inc.'s profit topped analysts' estimates and investors increased bets the Federal Reserve will keep borrowing costs on hold next week.
Ryanair Holdings Plc advanced as crude fell for a third day. BNP Paribas SA rose to the highest in almost two weeks after Goldman said gains in commodities, prime brokerage and asset management offset fixed-income losses. Daimler AG climbed the most in three months after the carmaker said it would buy back $9.3 billion of its shares.
BNP Paribas, France's biggest bank by assets, added 2.7%. Societe Generale SA jumped 3.2%.
Goldman reported second-quarter profit of $4.58 a share, more than the $3.42 estimate by analysts in a survey.
Royal Bank of Scotland Group Plc rose after Dresdner Kleinwort upgraded shares of Britain's second biggest lender and the Bank of England damped speculation it will increase rates. The stock climbed 2.7%.
Dresdner Kleinwort raised its recommendation on the stock to ``add,'' saying the company has ``dealt with'' its weakened capital base and is capable of withstanding a U.K. economic decline.

Stocks on Wall Street were volatile Tuesday as investors welcomed Goldman Sachs' better-than-expected earnings report, but remained wary amid mixed readings on the economy, including a rise in a measure of wholesale inflation.
Goldman Sachs beats expectations. The investment bank reported sales and earnings that fell from a year ago, but topped estimates, showing that it continues to avoid the worst of the credit market fallout. Goldman Sachs shares gained 1%.
However, other financial shares weakened. American Express declined after brokerage Friedman Billings reiterated its "underperform" rating, saying that it expects the company to see more losses going forward due to the strapped consumer.
Best Buy tops forecasts. The electronics retailer reported a lower quarterly profit that nonetheless topped estimates. The company also reiterated its full-year sales and earnings forecasts. Investors seemed to take a sell-the-news approach and sent Best Buy stock more than 3% lower.
Wholesale prices rise. The May Producer Price Index (PPI), a measure of wholesale inflation, rose 1.4% versus forecasts for a rise of 1%, reflecting the spike in food and energy costs. PPI rose 0.2% in April. The so-called core PPI, which strips out volatile food and energy prices, climbed 0.2%, as expected, after increasing 0.4% in the previous month.
Housing market continues to weaken. Housing starts and building permits both fell in May, with starts missing forecasts and permits, a measure of builder confidence, topping estimates. The number of single-family home starts fell to a 17-year low.
Manufacturing activity weakens. Industrial production fell 0.2% in May, according to a Federal Reserve report Tuesday morning that was worse than expected. Capacity utilization also dipped modestly, to 79.4% from 79.6% in the previous month.

The dollar dropped against the euro for a second day as declines in housing and industrial production raised speculation that the Federal Reserve will delay increasing borrowing costs this year.
Sterling dropped versus euro as King predicted British inflation will exceed 4% this year. The rate accelerated to 3.3% in May, the highest level since at least 1997, the Office for National Statistics said in a report. Mervyn King said the path to bringing inflation within the central bank's target is ``uncertain.''
U.S. housing starts dropped to an annual rate of 975,000 in May, from a revised 1.008 million the previous month, the Commerce Department said. It was the lowest since March 1991.
Production in U.S. factories, mines and utilities declined 0.2% last month after dropping 0.7% in April, the Fed reported. Economists had forecast industrial production would rise 0.1%.
The dollar weakened earlier against the euro after the Wall Street Journal and the Financial Times reported the U.S. central bank would probably leave borrowing costs unchanged beyond its June policy meeting.
The euro pared gains against the dollar after a report from the Mannheim-based ZEW Center for European Economic Research showed investor confidence in Germany fell this month to the lowest in more than 15 months.

EUR/USD tested $1.5550 before retreating to $1.5460. Later rate could rebound to $1.5526.
GBP/USD tested $1.9700, but failed to break above the figure and retreated to the lows around $1.9470. Later rate recovered to $1.9580.
USD/JPY held between the Y107.60/Y108.40 range.

Main focus is on MPC’s minutes, when BOE decided to leave rate unchanged at 5.0%.

Resistance 3: Y110.00
Resistance 2: Y109.20
Resistance 1: Y108.60
Current price: Y108.03
Support 1: Y107.60
Support 2: Y106.50
Support 3: Y106.20
Comments: Dollar remains between the Y107.60/Y108.60 range (support and resistance respectively). Above Y108.60 (Monday’s high), further level comes at Y109.20. Rise above may extend to Jan 10 high on Y110.00/10. Below Friday’s lows on Y107.60, support is around Y106.50. Below correction may reach Y106.20.

Resistance 3: Chf1.0620
Resistance 2: Chf1.0520
Resistance 1: Chf1.0460
Current price: Chf1.0436
Support 1: Chf1.0370
Support 2: Chf1.0320
Support 3: Chf0.0260
Comments: Techs on dollar hasn’t changed with support comes at yesterday’s lows on Chf1.0370, then – on Chf1.0320. Below losses may widen to Chf1.0260. Resistance comes at Monday’s highs on Chf1.0460 with a break above will point to Chf1.0520. Above there is a chance for a rise up to Chf1.0620 (May 0 high).

Resistance 3: $1.9800
Resistance 2: $1.9700
Resistance 1: $1.9580
Current price: $1.9507
Support 1: $1.9470
Support 2: $1.9400
Support 3: $1.9360
Comments: Cable still under pressure, despite some recovery around yesterday’s lows on $1.9470 with a break under will open the way to $1.9400 (Last Friday’s low) and then – to May 15 lows on $1.9360. Minor resistance is around hourly high on $1.9580. Stronger level comes at yesterday’s high on $1.9700, then – near Jun 09 on $1.9800.

Resistance 3:$1.5820
Resistance 2: $1.5660
Resistance 1: $1.5550
Current price: $1.5477
Support 1: $1.5460
Support 2: $1.5340
Support 3: $1.5300
Comments: Euro continues to weaken with resistance comes at Jun 17 highs on $1.5550, then – at $1.5660. Stronger level is around $1.5820. Strong support comes at yesterday’s low on $1.5460, then – on $1.5340 with a break under will open the way to $1.5300 (Friday’s low).

High Low Close
EUR/USD 1.5550 1.5459 1.5504
USD/JPY 108.36 107.58 107.99
GBP/USD 1.9697 1.9468 1.9562
USD/CHF 1.0456 1.0376 1.0417

EUR/JPY 167.79 167.00 167.39
EUR/GBP 0.7952 0.7870 0.7923
GBP/JPY 212.65 210.63 211.20
GBP/CHF 2.0521 2.0309 2.0380

Change % Change Last
Nikkei -6.00 -0.04% 14,348.37
Topix +0.29 +0,02% 1,401.98
FTSE +67.30 +1.16% 5,861.90
DAX +66.28 +0.98% 6,796.16
CAC +28.59 +0.61% 4,686.33
Dow -108.78 -0.89% 12,160.30
NASDAQ -17.05 -0.69% 2,457.73
S&P -9.21 -0.68% 1,350.93
10yr Note -0.2000 -0.047% 4.225%
NYMEX Crude Oil -0.60 -0.45% 134.01
Gold +0.60 +0.07% 886.90

05:00 Japan Leading indicators (April) final - 30.0
05:00 Japan Coincident indicators (April) final - 22.2
08:30 UK BoE meeting minutes (04-05.06)
10:00 UK CBI industrial order books balance (June) - -10%