Expert Analysis of Today's Market

• The dollar was little changed against most key currencies ahead of Friday’s important US employment data. The greenback earlier pared overnight gains following New York Federal Reserve Bank President Timothy Geithner’s dovish comment that policy makers and financial industry leaders must “act forcefully” to stem the financial-market crisis, increasing speculation the Fed will cut interest rates more aggressively at the April 31 meeting. The Canadian dollar advanced on strengthening commodity prices.


• The EUR/USD traded lower overnight pressured by data on soft European retail sales and European Central Bank council member Klaus Liebscher’s dovish comment. The pair successfully tested support from its uptrend and rose on a more-than-expected increase in US initial jobless claims and Geithner’s comment. The pair is between support from the uptrend and resistance from the all-time high. The employment report tomorrow will possibly push the pair outside this range. We are selling the EUR/USD and USD/JPY.

Financial and Economic News and Comments

US & Canada

• US initial jobless claims rose a stronger-than-expected 38,000 in the week ended March 29 to 407,000, the highest since Hurricane Katrina in September 2005, the Labor Department said. The four-week average of new claims increased 15,750 to 374,500 last week. The data may be distorted by difficulties to adjust for the Easter holiday, but the rising trend in claims indicates a US recession. The unemployment rate for workers with unemployment insurance climbed to 2.2% from 2.1%. Continuing jobless claims rose 97,000 to 2,937,000 in the prior week.

• US service industries contracted less than forecast in March. The Institute for Supply Management's nonmanufacturing index rose to 49.6 in March from 49.3 in February, slightly below the 50 dividing line between growth and contraction. The new orders component increased to 50.2 in March from 49.6 in February. The employment index was unchanged at 46.9 while the index for supplier deliveries fell to 49.0 in March from 50.0 in February. The prices paid index rose to 70.8 from 67.9, continuing to signal high inflation.


• New York Federal Reserve Bank President Timothy Geithner said capital markets are still “substantially impaired” and policy makers and financial industry leaders must “act forcefully” to stem the crisis.

Europe

• European retail sales unexpectedly fell 0.5% m/m and 0.9% y/y in February, the European Union’s statistics office said.

• European Central Bank council member Klaus Liebscher said inflation, while “alarmingly high,” will slow toward yearend from its “elevated level.” On Tuesday ECB council member Christian Noyer said he thought inflation expectations are well anchored. These comments imply that some ECB policy makers see an economic slowdown in Europe and prepare the market for interest-rate cuts.


• The European services purchasing managers index declined to 51.6 in March from 52.3 in February, Royal Bank of Scotland Group Plc said. The March number still indicates expansion as above 50. In Germany, services growth unexpectedly slowed, with a gauge dropping to 51.8 in March from 52.2 in February, NTC Research said.


• The UK overall services PMI fell to 52.1 in March, still indicating expansion, from 54.0 in February, Chartered Institute of Purchasing and Supply, Royal Bank of Scotland, and NTC Research reported.


• The quarterly Bank of England survey showed lenders reduced the availability of credit to UK home buyers and businesses in Q1 2008 and a further tightening is expected in the coming months. The report also showed that default rates by midsize and large non-financial corporations had picked up more sharply than expected in Q1 2008. Default rates on secured lending to households also rose and are expected to rise further as credit conditions are deteriorating, the BOE said.

Asia-Pacific

• Japanese consumer confidence fell to -57.7 in Q1 2008 from -40.3 in Q4 2007, the lowest level in five years. 57% of the respondents said they plan to spend less in the next 12 months, and 40.5% expect wages to fall, the Bank of Japan said. Japanese consumers’ inflationary expectations remained very high. 86.0% of consumers said they expect prices to rise this year. In the previous quarter, 86.3% said prices may rise, the highest since the BOJ started asking people about inflation in 1997.

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