Expert Analysis of Today's Market

• The dollar traded mostly higher against its key rivals Tuesday as stronger-than-expected US producer prices and New York manufacturing decreased the chance of further aggressive Fed interest-rate cuts. The euro fell modestly following the release of weaker-than-expected investors’ sentiment in Germany. The yen declined as US stocks gained. Sterling, today’s worst performer, fell to a new all-time low against the euro. The Australian and Canadian dollars were little changed against the greenback.


• The GBP/USD fell to a 6-week low after reports showed UK consumer prices rose at a slower pace than forecast, retail sales fell the most in three years, and the housing market deteriorated to the worst since records began in 1978. There are strong resistance in the 1.98-area and strong support in the 1.94-area.

Financial and Economic News and Comments

US & Canada

• The US producer price index rose a larger-than-expected 1.1% m/m in March, following a 0.3% m/m increase in February, the Labor Department said. Excluding food and energy, the PPI increased 0.2% m/m, as forecast. March producer prices climbed 6.9% y/y, compared with a 6.4% y/y gain in February. The core PPI rose 2.7% y/y, the biggest increase since July 2005.

• The US Treasury Department reported that net monthly purchases by overseas investors of US securities totaled $64.1 billion in February.


• Builder confidence in the market for new single-family homes remained unchanged for a third consecutive month in April, according to the National Association of Home Builders/Wells Fargo housing market index. The index held at 20, up marginally from the record low of 18 in December 2007.


• The NY Fed manufacturing index unexpectedly rose to 0.63 in April, up from the record low of -22.23 in March, the Federal Reserve Bank of New York reported. New orders rose to 0.06 and employment fell to 0 in April. Overall the index indicates the New York manufacturing sector is stalling.

Europe

• Germany’s ZEW economic sentiment index unexpectedly dropped to -40.7 in April from -32.0 in March. The current economic situation indicator improved to 33.2 in April, still lower than the consensus forecast of 34.0, from 32.1 in March. It appears the ongoing financial-market turmoil led German investors to feel that relatively positive German economic data will not continue. The ZEW believes the drop partly stems from “the extraordinarily high price pressure in Germany” and recommends the European Central Bank not to cut interest rates.

• ECB governing council member Jürgen Stark said he “cannot be sure” if interest rates at a 6-year high of 4.0% can contain inflation. Although the governing council “believes” current rates will keep a lid on inflation, “we cannot be sure,” Stark said.


• The UK CPI inflation remained at 2.5% y/y in March, less than the forecast 2.6% y/y, the Office for National Statistics said. Prices rose 0.4% m/m.


• The number of chartered surveyors reporting a fall in UK house prices rather than a rise totalled 78.5% in March, up from 65.7% in February, the Royal Institution of Chartered Surveyors reported.


• The British Retail Consortium said same-store retail sales fell 1.6% y/y in March, the largest decline in three years.

Asia-Pacific

• Minutes from the Reserve Bank of Australia April 1 meeting released today showed that RBA board members thought higher borrowing costs, as well as tighter credit standards for more risky borrowers, are working to “foster the moderation in demand growth that was needed to ease the pressure on inflation.” Slower global economic growth and “tighter financial conditions” in Australia are also likely to “reduce expansionary forces.”

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