Expert Analysis of Today's Market

• The dollar was lower against the yen and little changed against the euro on Friday. The yen, the bestperforming currency this week, hit an 11-week high versus the dollar as investors continued to unwind risky carry trades. The yen is heading for its biggest weekly gain against the euro since June 2005 and versus the dollar since December 2005.


• The USD/JPY has fallen dramatically this week. The pair is now testing the 117 support.

image 1 of USD/JPY

• The EUR/JPY dropped dramatically this week on unwinding of carry trades. The pair is now testing the 154 support.

image 2 of EUR/JPY

Financial and Economic News and Comments

US & Canada

• The Reuters/University of Michigan’s consumer sentiment index declined more than forecast to 91.3 in February, a 5-month low, from 96.9 in January. The Michigan survey’s expectations index, an indicator of future spending, dropped to 81.5 in February from 87.6 in January. The current conditions index fell to 106.7 from 111.3.


• St. Louis Federal Reserve President William Poole said while there “could be a recession,” one is not likely, echoing former Fed chairman Alan Greenspan’s comments this week. “Energy supply shocks are disruptive, but they need not create recessions,” Poole said. “Although an outside shock may be the catalyst, or trigger, that creates undue inflation pressures, the fundamental problem is not the catalyst but the powerful and risky brew of an overheated economy," he elaborated.


• John Lipsky, the IMF’s First Deputy Managing Director, said the world economy remains “very solid.” Lipsky said from Palo Alto, California: “Growth continues, in the major economies and around the world, to look very solid….There are risks in the outlook, and we’ve been reminded of that in the past few days and weeks. It has not had any fundamental impact on the outlook.”

Europe

• Germany’s retail sales fell more than expected in January as consumers cut spending after a tax increase. Sales, adjusted for inflation and seasonal swings, dropped 5.1% from December’s 2.6% gain, the Federal Statistics Office in Wiesbaden said. Sales declined 1.4% y/y.

Asia-Pacific

• Japan had zero inflation in January. Core consumer prices, excluding fresh food, were unchanged from a year earlier, the Statistics Bureau said in Tokyo. It is the first time prices failed to rise since May, after a 0.1% gain in December. Consumer prices excluding food and energy declined 0.2%, improving from a 0.3% decline a month earlier. Core prices in Tokyo, a harbinger of nationwide prices, were unchanged in February, compared with a 0.2% gain in January.

image 3 of Japan, Consumer Prices, Index