No key data from Japan.

The euro is trading around $0.8726 posting a two-month high vs. the dollar amid speculation the ECB could cut rates tomorrow, Fed Chairman Greenspan's bearish testimony and President Bush remarks that a strong dollar hurts exports. The single currency was also boosted after consumer prices rose in June at an annual rate of 3%, compared with market forecasts of 3.1% increase. Today's data of lower inflation is improving prospects of a rate cut. At latest Bloomberg poll none of the 33 economists expect a rate cut tomorrow but 70% predict a reduction next month. The euro gained vs. the greenback after President Bush's remarks to Italian newspaper La Stampa that the dollar is strong because that's how the market decides it. A strong dollar has benefits as well problems: It hurts our exports but attracts capital. The economy needs investment, which is drawn to the US thanks to the dollar. Markets cause the dollar to fluctuate and we must face the consequences. This is the first time that US President hinted a possibility of leaving the so-called strong dollar policy. Fed Chairman Greenspan added to euro's gains after he said that the US economic downturn is not over yet, and growth might not lift up until the end of the year. Although Greenspan expressed hopes for economic rise this year the Fed's Board of Governors was more pessimistic forecasting unemployment rise to 4.75% -5% from 4.5% in June. The single currency was underpinned somewhat by German Wiseman and President of the IFW Institute Horst Siebert who stated he saw slower growth but no threat of recession in the US or Germany. Siebert said that German GDP would grow at 2.2% next year, compared with 1.3% for this year. Resistance is seen at 87.50, 88.0 and 88.50. Support stands at 86.0, 85.60 and 85.30.
The dollar is trading around 124 yen after falling 1-1/4 yen to a session low of 123.78, after Greenspan's concern that the economic downturn in the US is not over yet. Yesterday, Moody's Investors Service slashed rating outlook for 15 Japanese life insurers to negative from stable, which put more pressure on the economy and the yen. Finance Minister Shiokawa said that he is not too worried about daily stock market movements and is planning to push ahead with his reforms. Nikkei has lost over 500 points in four consecutive days and is trading below 12,000 mark for the first time since March. US President Bush expressed hope that Japan's structural reform will bring expected results and urged the government to tackle bad loans issue as soon as possible. Washington has already expressed their willingness to provide experts in bad loans issue in order to help Japanese government resolve that issue in a most efficient way. The BoJ minutes revealed that at the meeting on June 14-15 board members agreed that the central banks should consider further easing if the economy continues to deteriorate further. The Board unanimously kept monetary policy unchanged and left banks' target of guiding banks' reserves at 5 trillion yen unchanged. Support is viewed at 123.80, 123.50 and 123.0. Resistance is eyed at 124.60, 125.00 and 125.20