Expert Analysis of Today's Market

USD Mostly Higher Ahead of FOMC

Hans Nilsson 2008-08-04

The dollar rose against most of its rivals Monday after US personal income and spending exceeded expectations. The greenback traded near a one-month high on expectations the Federal Reserve will keep its benchmark rate unchanged at 2.0% when policy makers meet tomorrow. The euro gained as the eurozone PPI rose to a record high. The AUD/USD is testing support at the 0.93 area. The USD/CAD rallied as the 1.03 resistance was broken. The yen fell slightly as US stocks rebounded as oil prices weakened.

The GBP/USD fell after a report showed the UK construction industry shrank in July at the fastest pace in 11 years, raising speculation the Bank of England will cut interest rates. The pair is in a short-term downtrend, likely to test support at 1.95. We expect further deteriorating UK economic outlook and lower interest rates.

www.cmsfx.com

Financial and Economic News and Comments

US & Canada

US consumer spending rose a stronger-than-expected 0.6% m/m and personal income unexpectedly increased 0.1% m/m in June, the Commerce Department said. Personal income rose 5.7% y/y and personal consumption rose 5.3% y/y in June. Disposable personal income (income after taxes) fell 1.9% m/m in June but is up 7.6% y/y.

The overall PCE deflator rose 0.8% m/m in June, up 4.1% y/y. The core PCE deflator, the Fed’s preferred price gauge, which excludes food and energy, increased a stronger-than-expected 0.3% m/m in June, up 2.3% y/y. After adjusting for inflation, real consumption fell 0.2% m/m in June, up only 1.2% y/y, so consumers keep spending but get less for their money as inflation reduces the real value of consumption.

Europe

Euro-zone producer prices rose 8.0% y/y in June, the highest since records began in January 1990, largely driven by energy costs.

Asia-Pacific

Australian house prices fell in Q2 2008 for the first time in almost three years. The price index for house prices in the nation’s eight capital cities fell 0.3% q/q in Q2, the Australian Bureau of Statistics said.

FX Strategy Update

2008
January | February | March | April

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The commentaries, charts, and information provided on this website are not intended as trading advice. Please contact a registered trading advisor if you have any questions.

This report is intended solely for distribution to customers of Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Globicus International, Inc.