Expert Analysis of Today's Market

• The dollar fell against most key currencies on Tuesday on more-than-expected declines in US consumer confidence and existing-home sales. The greenback is testing important support against major currencies. However, the major movements were the Swiss franc’s strength and the Australian dollar’s weakness. The Australian dollar fell about 1% against major currencies on much weaker-than-expected Australian inflation, dragging down the high-yielding New Zealand dollar to the benefit of low-yielding currencies like the Swiss franc.


• The AUD/USD touched the high level since 1990 last week, but it is extremely overbought. The pair recovered some overnight losses on weaker-than-expected US data. We expect a test of support at the 0.82-handle. If this support is broken, the pair will fall significantly.

Financial and Economic News and Comments

US & Canada

• US consumer confidence declined more than expected in April on concerns over rising gasoline prices and mortgage defaults. The Conference Board’s index of consumer confidence fell to 104.0 in April from 108.2 in March. The measure of present conditions fell to 131.3 from 138.5. The gauge of expectations for the next six months fell to 85.8 from 87.9.

• US existing-home sales dropped more than forecast in March to a 6.12 million annual rate, an 8.4% decrease from February’s revised 6.68 million annual pace, the National Association of Realtors said. Sales fell 11.3% y/y. The decline in sales, while partly weather related, is renewing concern about US economic growth.

• The Bank of Canada kept its main interest rate unchanged for a seventh meeting and said the risk of higher inflation has increased. The target rate for overnight loans remains at 4.25%. Policy makers increased their second-half forecast for inflation to above 2% from 1.7% in January and said it would return to 2% by mid-2008. “The Bank continues to judge that the risks to its inflation projection are roughly balanced,” the BOC said, similar to its earlier statements. “There is now a slight tilt to the upside,” the BOC added, however.

Europe

• Eurozone industrial orders fell a larger-than-expected 0.7% m/m but rose 4.7% y/y, Eurostat said.

Asia-Pacific

• Japan’s corporate services price index rose 0.6% y/y in March, the fourth consecutive month increase.


• Australia’s consumer price index rose a much less-than-expected 0.1% q/q in Q1 2007. Prices advanced 2.4% y/y, slowing from 3.3% y/y in the previous quarter, the Bureau of Statistics said.

FX Strategy Update