Expert Analysis of Today's Market

• The dollar was lower versus major currencies on Tuesday on speculation financial-company losses from subprime-mortgage defaults will grow, prompting the Federal Reserve to cut interest rates a third time this year. The dollar index dropped below 76 for the first time since the Fed launched the data series 34 years ago. The Canadian dollar and Swiss franc reached new highs. The yen fell in cross trades on a renewed interest in carry trades and weak Japanese leading economic index. Oil prices rose to new highs and gold prices were at a 28-year high.


• The EUR/USD touched a new all-time high as growth and interest differentials deteriorate against the dollar. Short- and long-term trends are positive; however, uniformly negative sentiment against the dollar and the EUR/USD’s overbought condition could lead to a sharp EUR/USD reversal.

Financial and Economic News and Comments

US & Canada

• No major economic data.

Europe

• UK retail store sales increased 1.0% y/y, the slowest pace in 11 months in October, as high interest rates caused consumers to cut spending, the British Retail Consortium said.


• Bank of England Governor Mervyn King said it may take months before commercial banks publish their full losses from the US subprime-mortgage slump.

Asia-Pacific

• Japan’s leading economic index fell to the lowest level in a decade, indicating the Japanese economy may contract. The leading index was zero in September, the Cabinet Office said. The coincident index, a reading of current business conditions, was still at a high 66.7 in September.

FX Strategy Update