The USD was broadly lower in the London session as US financial sector worries continued to permeate the market while data out of Europe was broadly in line with expectations. The theme in the Eurozone was consumer prices as we got reports for Germany, France and the Eurozone composite there. The results were all as expected with German CPI at 3.3%, French at 3.6% and the Eurozone at 4.0% annual rates. This helped take EUR/USD from an open near 1.5895 to close around 1.5935.

Employment data in the UK was mixed as jobless claims rose by a higher than expected 15.5K in June after an upwardly revised 14.3K the prior month, while the ILO unemployment rate improved to 5.2% from 5.3%. This left Sterling (GBP/USD) modestly higher for the session. The pair opened near 2.0025 and was sitting near 2.0040 at the close.

USD/JPY extended losses as European stock markets plunged in the session. Last we checked equity marts across the pond were down around -1.5% thus far. This coupled with yet another decline in US stock futures helped pare carry trades and take the yen crosses lower. USD/JPY opened the session near 104.60 and closed around the 103.85 mark. We expect another rise in the VIX (volatility index) -- which briefly broke above 30 yesterday -- would put more pressure on USD/JPY and help bring it back to the May lows around 102.60 initially.

The highlights in the NY session are the consumer prices report for June and Fed Chairman Bernanke's testimony before the House Financial Services Committee. CPI is expected to jump 0.7% on the headline and just 0.2% excluding food and energy. A higher than expected result should see some USD buying. Bernanke's testimony will be the same as the one he gave before the Senate yesterday and should not elicit reaction initially. The Q&A session will be key as we expect at least one congressman (the gentleman from Texas) will ask about the USD.

Upcoming Economic Data Releases (NY Session) Prior Estimate

7/16 12:30 CA Manufacturing Shipments MoM MAY 2.00% 0.40%
7/16 12:30 US Consumer Price Index (MoM) JUN 0.60% 0.70%
7/16 12:30 US CPI Ex Food & Energy (MoM) JUN 0.20% 0.20%
7/16 13:00 US Net Long-term TIC Flows MAY $115.1B - -
7/16 13:15 US Industrial Production JUN -0.20% 0.00%
7/16 14:00 US Bernanke Gives Semiannual Monetary Policy Testimony at House
7/16 14:45 UK Bank of England's Dale Testifies at Treasury Committee
7/16 14:45 UK Bank of England's John Gieve Speaks at Stock Exchange
7/16 17:00 US NAHB Housing Market Index JUL 18 18
7/16 18:00 US Minutes of June 24-25 FOMC Meeting
7/16 18:00 US Fed's Hoenig Speaks in Colorado on U.S. Economy