Expert Analysis of Today's Market

• The dollar fell versus its key rivals Wednesday following a dismal US economic forecast from the International Monetary Fund and a decline in US equities. The yen and Swiss franc rose against most of the major currencies after the IMF cut the US growth forecast. Sterling fell to a record versus the euro as a report showed UK consumer confidence dropped to the lowest in almost four years. The Bank of England is expected to cut interest rates 25 basis points while the European Central Bank is expected to keep rates unchanged at rate decision meetings Thursday.


• The EUR/USD traded higher as traders raised bets the Federal Reserve will cut rates 50 basis points next week, while the ECB will keep rates steady and not signal any policy easing tomorrow. A hawkish ECB stance will penetrate resistance at 1.59 while a dovish stance will break the uptrend support. The pair was also supported by speculation the G-7 will fail to deliver a viable plan to help boost financial-market confidence at the G-7 meeting Friday.

Financial and Economic News and Comments

US & Canada

• Sales of US merchant wholesalers were $377.4 billion in February, down 0.8% m/m but up 12.2% y/y, the Commerce Department said. The January preliminary estimate was revised downward $0.9 billion or 0.2%. Total inventories of merchant wholesalers were $421.9 billion in February, up 1.1% m/m and up 7.4% y/y. The January preliminary estimate was revised upward $1.0 billion or 0.2%. The February 2008 inventories/sales ratio for merchant wholesalers was 1.12, compared with 1.17 in February 2007.

• The International Monetary Fund estimated a 25% chance of a worldwide economic downturn in its semiannual World Economic Outlook. The IMF lowered its 2008 global growth forecast to 3.7%, and slashed its US 2008 growth forecast to 0.5% and US 2009 growth forecast to 0.6%. Growth in the euro area is expected to slow to 1.4% and Japan will expand 1.4% this year, the IMF said.

Europe

• The European GDP cooled to 0.4% q/q in Q4 2007, as tighter credit conditions and the euro’s gains weighed on European economic growth, following a 0.7% q/q increase in Q3 2007, the European Union’s statistics office said.


• UK manufacturing unexpectedly rose for a second month in February to the highest level since 2001. Factory output climbed 0.4% m/m in February, compared with a 0.5% m/m increase in January, the Office for National Statistics said. The factory output rose 1.9% y/y, the most since December 2006.

• UK consumer confidence fell to the lowest in March as the housing-market downturn worsened and former Chancellor of the Exchequer Nigel Lawson said the UK economy is heading for a recession. The consumer confidence index declined 1 point to 77 in March, the least since May 2004, Nationwide Building Society said. The gauges for present situation, expectations, and spending stood at 76, 79, and 64, respectively.

• The Organisation for Economic Co-operation and Development (OECD) maintained that domestic demand will help Germany’s economy to grow 2.1% in 2008 and 1.6% in 2009, while urging Chancellor Angela Merkel’s government to be bolder in changing policy.


• German financial-market regulator BaFin has ordered closure of Weserbank AG, a former cooperative bank for butchers and cattle-dealers founded in 1912, making it the first German bank to file for insolvency since the credit-market crisis began last year.

Asia-Pacific

• The Bank of Japan kept its key overnight lending rate unchanged at 0.5% at BOJ new Governor Masaaki Shirakawa’s first meeting. “Japan’s economic growth is slowing, mainly due to the effects of high energy and materials prices,” the BOJ said in its monthly report.


• Japan’s machine tool orders increased 2.9% y/y in March to ¥141.3 billion after being down 0.5% y/y in February and flat in January, according to preliminary data by the Japan Machine Tool Builders Association. In March, orders from overseas rose 11.2% y/y to ¥77.9 billion, but domestic orders fell 5.8% y/y to ¥63.3 billion.

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