Expert Analysis of Today's Market

• The dollar rose modestly against most key currencies on Tuesday following the news that Citigroup will sell a stake to the Abu Dhabi government. The yen fell versus most major currencies as stocks rallied on the Citigroup news. Both US consumer confidence and house prices fell more than expected; however, not pressuring the greenback. The Canadian dollar fell to a 7-week low as commodity prices declined. We sell the USD/JPY and AUD/USD.


• The EUR/USD was slightly lower today despite higher-than-expected German inflation. The pair has found some equilibrium the last few days where bulls and bears have canceled each other resulting in little changes in exchange rates. This may be a precursor to a big move. A break in the uptrend would be a bearish signal.

Financial and Economic News and Comments

US & Canada

• Citigroup Inc is selling up to 4.9% of itself for $7.5 billion to the Gulf Arab emirate of Abu Dhabi, giving the largest US bank fresh capital as it struggles with the credit crunch and threats to its capital base.


• The Conference Board index of consumer confidence for November fell more than expected to 87.3 from a downwardly revised 95.2 in October. The expectations component declined sharply to 68.7 in November from 80.0 in October. The present situation index fell to 115.4 in November from a downwardly revised 118.0 in October.

• The S&P/Case-Shiller index that covers 20 US metropolitan areas dropped 4.9% y/y in September and the 10 metropolitan areas index fell 5.5% y/y. All 20 metro areas showed price falls from August to September. Even the five metro areas that still have positive annual growth rates, Atlanta, Charlotte, Dallas, Portland and Seattle, show continued deceleration in returns, said Robert J. Shiller, chief economist at MacroMarkets LLC.


• Chicago Fed President Charles Evans said the weaker dollar “enhances” demand for US exports and Philadelphia Fed President Charles Ploser said the dollar’s decline is helping to close trade imbalances.

• Germany’s Ifo survey unexpectedly rose to 104.2 in November from 103.9 in October, compared with a consensus forecast of 103.3.

• German inflation increased more than expected, well above the European Central Bank’s 2.0% target rate. The German consumer price index rose 3.3% y/y in November, the fastest pace since records began in January 1996, using the harmonized European Union method, the Federal Statistics Office said.

• German Finance Minister Peer Steinbrueck said he expected the economic upturn in Germany to continue in 2008 despite the strong euro.

Asia-Pacific

• Japan’s government cut its assessment of the job market for the first time in more than three years. “Jobmarket conditions continue to be difficult and there has been a pause in improvement,” the Cabinet Office said in its monthly economic report for November.

FX Strategy Update