Expert Analysis of Today's Market

• The dollar fell across the board on Tuesday on speculation the Federal Reserve may have to cut interest rates further to reverse the US economic tide. The dollar was sold overnight and extended its decline after March US consumer sentiment fell to the lowest since December 1973 and US house prices fell at record pace. The Canadian dollar declined against most major currencies on concern the slowing US economy will hurt the Canadian economy. Most key currencies are at important technical levels.


• The EUR/USD rose after successfully testing support from the uptrend. There is resistance from the all-time high in the 1.59 area. The pair reached 1.5902 on March 17, the highest level since the euro debuted in 1999. European Central Bank President Jean-Claude Trichet will testify to the European Parliament’s economic and monetary affairs committee tomorrow. He is expected to warn about inflation and unlikely to indicate ECB rate cuts. There is strong support from the uptrend in the 1.53-area.

Financial and Economic News and Comments

US & Canada

• Home prices in 20 US metropolitan areas fell more than expected in January, showing no signs that house price deflation is abating. The S&P/Case-Shiller home prices of 20 US metropolitan areas fell 2.4% m/m (not seasonally adjusted) and 10.7% y/y in January. This was the 13th consecutive yearly decline and the steepest decline on record, indicating continued problems in the housing sector.

• The Conference Board US confidence index fell more than expected to 64.5 in March, a five-year low, from a revised 76.4 in February. The gauge of consumers’ expectations for the next six months slumped to 47.9, the lowest since December 1973. The measure of present situation declined to 89.2 in March from 104.0 in February. The present situation number could be interpreted as people were just influenced by negative news reporting. However, this indicator is usually lagging; thus, we think it will continue to fall.

• Canadian retail sales rose 1.5% m/m to C$35.8 billion ($35.3 billion) in January after a revised 0.8% m/m gain in December, Statistics Canada reported. Excluding automotive-related goods, retail sales increased 1.3% m/m. All eight components of the retail sales index posted gains in January.

Europe

• The Confederation of British Industry lowered its forecast for the UK economic expansion to 1.8% y/y for 2008, down from an original forecast of 2.0% y/y. The UK economy will slow to 1.7% in 2009, the CBI said. The Bank of England will cut its benchmark rate three times and reach 4.5% in 2009, the group predicts. “Having enjoyed two years of strong growth, we are now living in uncertain times,” said Richard Lambert, CBI director general. “We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth.”


• Iceland’s central bank raised its benchmark interest rate to 15% at an unscheduled meeting to halt a slump in the Icelandic krona and a surge in inflation. The currency rose strongly on the announcement.

Asia-Pacific

• No major economic data.

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