Expert Analysis of Today's Market

• In NY afternoon trading Thursday, the dollar fell against key currencies ahead of Friday’s US employment reports. Today the European Central Bank and Bank of England left their benchmark interest rates unchanged at 4% and 5.75%, respectively. ECB President Jean-Claude Trichet said the credit-market turmoil had not changed the ECB’s view that the eurozone economy remains solid or its worries about inflation.


• The EUR/USD rose for the first time in 4 days. If the US employment data is strong tomorrow, the pair may test the 1.40 support.

Financial and Economic News and Comments

US & Canada

• US initial jobless claims rose 16,000 to 317,000, higher than expected, on a seasonally-adjusted basis in the week ended September 29, from an upwardly revised 301,000 a week earlier, the Labor Department said. The four-week moving average rose to 312,750 from 312,250.


• US August factory orders posted the sharpest fall since January’s 4.2% decline as the credit-market turmoil eroded business confidence. August’s factory orders fell 3.3%, more than expected, following a downwardly revised 3.4% increase in July, the Commerce Department said.


• Canadian building permits rose a less-than-forecast 1.4% to C$6.29 billion ($6.3 billion) in August, following a revised C$6.2 billion in July, Statistics Canada said.

Europe

• The European Central Bank, as expected, left its key interest rate on hold at 4%. ECB President Jean-Claude Trichet signaled the ECB is in no hurry to raise interest rates. “It remains necessary to gather additional information and examine new data before drawing further conclusions for monetary policy,” Trichet said at a press conference. Trichet omitted his frequently used phrase that the ECB’s monetary policy “is still on the accommodative side,” suggesting the ECB is not considering interest rates are boosting economic growth. The eurozone interest rates may have reached a peak.


• The Bank of England, as expected, kept its key interest rate unchanged at a 6-year high of 5.75% as the BOE assessed the effect on the UK economy of higher credit costs and a run on Northern Rock Plc.


• UK house prices declined in September for the first time in 9 months as mortgage rates increased and lenders were cautious. The average cost of a home in Britain fell 0.6% m/m to £198,500 ($403,000) in September after rising 0.3% m/m in August, HBOS Plc reported. Prices rose 10.7% y/y.

Asia-Pacific

• Australia’s home-building approvals fell a more-than-expected 1.7% m/m in August, the first decline in 3 months, the Bureau of Statistics said, after the Reserve Bank of Australia raised interest rates and the equity market fell.


• Bank of Japan Deputy Governor Kazumasa Iwata said financial-market turmoil and an economic slowdown in the US or Europe could hurt the Japanese economy. “If the stock slump and the yen’s gain continue, that would have a negative effect on Japan’s economic growth,” Iwata said.

FX Strategy Update