Expert Analysis of Today's Market

• The dollar was little changed against most key currencies on Tuesday. The Fed minutes showed Fed policy makers had difficulties in deciding on the 75 basis-point interest-rate cut at the March 18 FOMC meeting. Sterling, today’s big loser, fell after weak UK housing data and UK Prime Minister Gordon Brown’s comment increased speculation the Bank of England will cut rates on Thursday. The EUR/GBP made a new all-time high just below 0.80. The European Central Bank is likely to keep rates unchanged at its meeting on Thursday.


• The EUR/USD traded modestly higher supported by weaker-than-expected US pending home sales. Continuing its rise along its uptrend-support, the EUR/USD has been unable to penetrate its all-time high. The ECB rate decision on Thursday may possibly push the pair outside this range.

Financial and Economic News and Comments

US & Canada

• The Fed minutes showed Fed officials had difficulties in deciding on the interest-rate cut at the March 18 FOMC meeting. “With the uncertainties in the outlook for both economic activity and inflation elevated, members noted that appropriately calibrating the stance of policy was difficult, partly because some time would be required to assess the effects of the substantial easing of policy to date,” according to the minutes. The minutes also showed staff economists had “substantially revised down” their forecast for 2008 to show a first-half contraction in GDP, with a “slow rise” in the second half.


• US pending home sales fell a more-than-expected 1.9% m/m to 84.6 in February, the lowest reading since records began in 2001, the National Association of Realtor’s said. The data indicates no sign of a bottom in the US real-estate recession. The index fell in all US regions except the Northeast.

• The National Federation of Independent Business’ small business optimism index fell 3.3 to 89.6, the lowest reading in the index history and below the recession of 2001 and 1991. This is another indication of that the US economy has entered a recession.

• The International Monetary Fund warned both banks and governments that they should prepare for possibly even more damaging financial disruptions. “The critical challenge now facing policymakers is to take immediate steps to mitigate the risks of an even more wrenching adjustment, including contingency and other remediation plans, while also addressing the seeds of the present turmoil,” the IMF said in its semi-annual Global Financial Stability Report.

Europe

• UK home prices fell a larger-than-expected 2.5% m/m in March to £191,556 ($379,000), Halifax reported. The drop is the largest since September 1992, raising fears that the downturn in the UK housing market may be much worse than previously thought.

• UK Prime Minister Gordon Brown said the Bank of England can ease monetary policy because of past efforts to contain inflation. He said “we can cut interest rates.”

Asia-Pacific

• Japan’s economy watchers’ indexes were mixed in March, still indicating weakening conditions in the Japanese economy. The current conditions gauge rose to 36.9 in March from 33.6 in February, the Cabinet Office said. The future conditions gauge dropped to 38.2 from 39.5. A reading below 50 indicates that most respondents believe conditions are worsening.

• Australia’s business confidence index fell to -4 in March from -2 February, equaling January’s reading and the lowest level since September 2001, according to the National Australia Bank. A reading below zero shows those expecting business to deteriorate outnumber those predicting an improvement. The business conditions gauge fell to 7 in March from 11 in February. In the past three months, the confidence index has fallen by 10 points, a significant fall that indicates further slowing in the Australian economy.

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