Expert Analysis of Today's Market

• The dollar rallied against the yen and euro in NY trading Friday, while the yen and Swiss franc dropped versus most key currencies, as global stocks gained on better-than-expected earnings from Google and Citicorp. The EUR/USD fell the most in two weeks and did some technical damage as the pair broke its short-term uptrend. Sterling was supported by continued speculation the Bank of England will take mortgages off lenders’ balance sheets. The EUR/GBP was weak as its uptrend was broken today following an all-time high just two days ago. The Canadian dollar headed for its biggest weekly gain since February on advances in crude oil and stocks, and the Australian dollar advanced versus the yen this week as risk appetite rose.


• The EUR/JPY rose to a 3-month high on speculation financial firms will weather credit-market turmoil, encouraging investors to purchase higher-yielding assets funded by loans in Japan. The pair (like most yen pair) follows stock-market development closely. Both the EUR/JPY and stocks are now at important resistance levels. The pair, modestly overbought, is at resistance from the upper band in its short-term trading channel and also from the long-term downtrend. We expect some consolidation. A penetration of the 1400- 1420 resistance at the S&P 500 stock index would be bullish for the pair.

Financial and Economic News and Comments

US & Canada

• No major US economic indicators scheduled for today.


• Canada’s leading economic indicators index was unchanged in March, matching consensus forecasts, after falling a revised 0.2% in February, data from Statistics Canada showed.


• Canada’s wholesale sales unexpectedly fell 1.8% to C$42.6 billion ($42.3 billion) in February erasing January’s 2.6% gain, mainly due to a 4.9% decline in Ontario to C$20.7 billion, Statistics Canada reported.

Europe

• Germany’s producer price inflation accelerated faster than expected to 4.2% y/y in March, the highest yearon- year rate since 4.4% y/y in December 2006, due to higher energy prices, compared with 3.8% y/y in February and 2.5% y/y a year ago, data from the Federal Statistical Office showed. Excluding energy, March producer price index rose 2.8% y/y. The PPI grew a faster-than-forecast 0.7% m/m, unchanged from February.


• The euro-area 2007 budget deficit, narrowing to a 7-year low, declined to €55 billion ($87.7 billion) or 0.6% of GDP, from €111.5 billion or 1.3% of GDP in 2006, Eurostat reported.


• The UK budget deficit widened to a record £10.2 billion ($20.4 billion) in March, a third more than expected, driven by higher capital investment and an increase in spending by state-owned companies, the Office for National Statistics said. The deficit was the largest for the month since records began in 1993 and widened from £7.1 billion a year earlier.

Asia-Pacific

• Japan’s consumer confidence rose in March with the sentiment index rising to 36.7, from a 5-year low of 36.1 in February, the Cabinet Office said. The gauge for willingness to buy durable goods increased to 36.2. The small gain in March consumer confidence, just a rebound from declines in the previous months, may not be sufficient to spur consumer spending as inflation outpaces growth.

FX Strategy Update