Expert Analysis of Today's Market

• The greenback traded mixed on Friday after US stocks fell for a third day on continued worries about the financial sector after Wachovia and others warned about subprime-related losses. The dollar gained against the dollar-block currencies and sterling but was little changed against the euro and Swiss franc. The yen, today’s biggest gainer, benefited from increased risk aversion and carry-trade unwinding.


• The EUR/JPY broke the support from the bull-trend, pressured by the increased risk aversion and concerns over the global economic outlook. The EUR/JPY short-term direction correlates to the direction of equities. After making a double-top, the pair is likely to fall further but may find some temporary support at the important 162-area support. If this is broken, the pair will fall to 159.

Financial and Economic News and Comments

US & Canada

• The Reuters/University of Michigan preliminary consumer confidence index for mid-November fell more than expected to 75 from 80.9 in October.


• The US trade gap unexpectedly narrowed 0.6% to $56.45 billion in September from August’s revised $56.80 billion, the Commerce Department said, despite record prices for imported crude, as export growth outpaced imports. In September, US exports grew 1.1% to $140.15 billion, while imports increased 0.6% to $196.60 billion.


• US import prices soared in October at their fastest pace since early last year while export prices jumped at more than a decade high, increasing worries that high oil prices and a falling dollar pose inflation risks. Import prices rose 1.8% m/m and 9.6 % y/y in October. Excluding petroleum, import prices increased 0.5% m/m and 3.2% y/y in October, the Labor Department said.

• Canada’s trade surplus narrowed more than forecast in September to a 9-year low, as the Canadian dollar soared reducing exports and increasing imports. The surplus shrank to C$2.65 billion ($2.82 billion) in September from a revised C$4.29 billion in August, Statistics Canada reported. Imports rose 2.2% and exports dropped 2.3% to the lowest in 11 months.

Europe

• The European Commission cut its forecast for economic growth by 0.3%, saying inflation may accelerate faster than previously anticipated as energy and food costs soared. The EMU economy will expand 2.2% next year.


• “Economic growth is becoming more moderate and the downside risks have clearly increased,” European Union Economic and Monetary Affairs Commission Joaquin Almunia said.


• European Central Bank council member Axel Weber said there is a risk the ECB will fail to meet its pricestability objective for another two years.

Asia-Pacific

• The yuan had the biggest weekly advance against the dollar in two years, after US Treasury Secretary Henry Paulson said China is “out of step” with the rest of the world’s calls for faster appreciation.

FX Strategy Update