Expert Analysis of Today's Market

• The dollar, testing support, fell moderately against most major currencies on Friday after the US Q1 2007 GDP rose less than expected. However, the greenback pared some losses in New York trading. The yen was weak after the Japanese economic data showed widespread weakness in the Japanese economy.


• The EUR/USD touched an all-time high, still not convincingly breaking the resistance. Next week we may see big moves as trading will be light due to the Japan Golden Week and Europe May Day holidays. The RSI indicates an overbought market and a double-top could indicate a reversal for the pair.

Financial and Economic News and Comments

US & Canada

• The US GDP rose a less-than-forecast 1.3% in Q1 2007, the weakest growth rate since 2003. The weak housing sector reduced GDP growth by 1.0% while inventories and net exports exerted a combined 0.8% drag on real GDP growth. Personal consumption plus business investment in equipment, software, and structures rose at a 3.6% annual rate. The GDP price index rose at a 4.0% rate in Q1, the fastest increase since 1991. Real GDP growth was slower than expected, but the weak inventory accumulation gives firms more room to increase production in the next few quarters.

• The US employment cost index rose a slightly less-than-expected 0.8% in Q1. Wages and salaries increased 1.1%, the largest gain since 2000, but benefits rose only 0.1% due to a drop in benefit costs in the private sector.


• Reuter/University of Michigan’s index of US consumer confidence in April showed an upward revision to 87.1, still leaving a 1.5% decline from March. Upward April revisions were seen in both current and expectations components. The 1-year inflation expectations were unrevised at 3.3%.

Europe

• Germany’s retail sales rose the most in five months in April, suggesting consumer spending will help support growth. The index measuring sales rose to a seasonally adjusted 55.6 in April from 52.8 in March, NTC Economics Ltd. reported.

Asia-Pacific

• Japanese inflation rose less than forecast. Core consumer prices, which exclude fresh food, fell 0.3% y/y in March and Tokyo core prices were unchanged y/y in April, the government statistics bureau said.

• The Bank of Japan slashed its inflation forecast close to zero and kept the benchmark interest rate unchanged, saying prices will take another year to accelerate. Core consumer prices will rise 0.1% in the 12 months ending March 2008 and 0.5% the following year, the BOJ said in Tokyo in its semi-annual outlook. Policy makers had previously predicted a 0.5% inflation rate this year.


• Japanese factory output unexpectedly fell 0.6%. Meanwhile, Japanese retail sales declined 0.7% and household spending rose a less-than-expected 0.1%. The unemployment rate held steady at a 9-year low of 4%.

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