Expert Analysis of Today's Market

• In NY trading Thursday, the dollar was mostly lower versus key currencies on an unexpected fall in US durable-goods orders. The European currencies were modestly higher against the greenback with the Swiss franc making the biggest gains. The dollar-block currencies rose against the dollar on better yield and growth outlooks, while the yen advanced as the US equity market declined in New York afternoon trading.


• The EUR/USD approached its record high today on bets the Federal Reserve will cut interest rates at least 25-basis points at the October 31 FOMC meeting. The pair is testing the 1.4350-area resistance. If this is broken, the pair will possibly rise to the 1.4570-area. We are buying one unit with stop at 1.4070.

Financial and Economic News and Comments

US & Canada

• US new-home sales increased 4.8% m/m in September to a seasonally adjusted annual rate of 770,000, the Commerce Department said. August new-home sales were revised significantly lower to a 7.9% m/m decline to an annual rate of 735,000, an 11-year low. New-home sales fell 23.3% y/y in September. New homes are calculated based on contract signings rather than closings, making it timely; however, the drawback of the data is that cancellations are not calculated in the data. The housing sector is likely to stay weak for the foreseeable future.


• US durable-goods orders unexpectedly declined 1.7% m/m in September to a seasonally adjusted $214.53 billion, after a revised 5.3% decrease in August, the Commerce Department said. Excluding transportation, orders increased 0.3% m/m. The decline in orders was mostly due to defense aircraft and parts and motor vehicles and parts.


• US initial jobless claims fell a less-than-expected 8,000 to 331,000 in the week ended October 20, after reaching a 6-month high the prior week, the Labor Department said. The four-week average rose 7,750 last week to 324,750, its highest level since September 1.

Europe

• German business confidence dropped to a 1½ -year low in October. The Ifo research institute said its business climate index fell slightly less than expected to 103.9 in October from 104.2 in September. Current business conditions fell to 109.6 from 109.9 while a measure of expectations declined to 98.6 from 98.7.


• The Bank of England said the global financial system is at risk of further instability because of ongoing uncertainties about credit-market losses. The BOE stated in its financial stability report that markets are now more susceptible to a potential slump in global stocks, a slide in the dollar or a crash in UK commercial property after the US subprime-mortgage trouble.

Asia-Pacific

• China’s economy expanded 11.5 % y/y in Q3, matching expectations, following an 11.9% y/y in Q2 2007. China’s statistics bureau said. Inflation cooled in September to 6.2% y/y from an almost 11-year high of 6.5% y/y in August after food-price gains slowed. Industrial production increased 18.9% y/y in September, following 17.5% in August. Retail sales rose 17.0% y/y in September after gaining 17.1% y/y in August.


• The Reserve Bank of New Zealand left its benchmark interest rate unchanged at 8.25%, saying record-high borrowing costs have not yet stemmed inflation.

FX Strategy Update