Expert Analysis of Today's Market

• Trading mixed Wednesday, the greenback fell against most European currencies and the Australian dollar but rose against the yen. The Canadian dollar was little changed after the Bank of Canada saw protectionist threat from the falling dollar. Today’s main trading feature was the rebuilding of carry trades. Sterling fell after Bank of England Governor Mervyn King said the BOE’s “central projection is for growth to slow sharply” in 2008.


• The GBP/USD is testing the 2.05-area support. If this is broken, the pair will likely test major support at the 2.00 level.

Financial and Economic News and Comments

US & Canada

• The US producer price index rose 0.1% m/m and 6.0% in October. Core producer prices were unchanged in October and increased 2.5% y/y, the Labor Department said.

• US retail sales increased at a modest 0.2% m/m in October, following an upwardly revised 0.7% m/m rise in September, the Commerce Department said. Excluding autos, gasoline and building materials, sales rose 0.1% m/m in October after increasing 0.2% in September.


• Fed Chairman Ben S. Bernanke said the Federal Reserve will improve communications with Wall Street and Main Street. The Fed will publish economic forecasts quarterly, up from twice a year, but will not set an explicit inflation target.


• Bank of Canada Senior Deputy Governor Paul Jenkins said the US dollar’s decline against other currencies raises the risk of disorderly adjustments, citing the threat of increased protectionism.

Europe

• The inflation rate will settle to the Bank of England’s 2% inflation target in 2009 after rising above the target next year, the BOE said. Its forecasts are based on market assumptions the BOE will cut its key interest rate a quarter points to 5.5% in Q1. Growth risks are “on the downside,” and inflation risks are “balanced,” the BOE said.

Asia-Pacific

• Australian consumer confidence sentiment index fell 4.2% to 110.5 in November, Westpac Banking said. Meanwhile, Australian wages rose 1% q/q in Q3 after increasing 1.1% q/q in Q2, the statistics bureau said.


• China’s retail sales rose 18.1% y/y in October to 826.3 billion yuan ($111 billion), the biggest gain since 1999, after rising 17% in September, the statistics bureau said.

FX Strategy Update