Expert Analysis of Today's Market

• The dollar pared overnight losses on Wednesday on modest gains in the US equity market calming fears the US sub-prime mortgage trouble and wider credit sector contamination could undo the US economic recovery.


• The USD/JPY recovered most of its overnight losses. The support of the upward sloping bull-channel has been broken and the 121-122 support is being tested. If the 121-122 is broken, the USD/JPY will fall further.

• The US dollar index is at critical support at the December 2004 low. If this support was broken, the dollar index would plunge. As long as the asset markets are stabilized, there is a reasonable chance the support will hold.

Financial and Economic News and Comments

US & Canada

• The CEO business confidence index unexpectedly fell 8 points to 45 (a neutral reading) in Q2. All four components were below 50 as current economic conditions held unchanged as the other components -- economic expectations, own industry expectations and current industry conditions, fell from 50+ levels in Q1.

Europe

• The European Central Bank’s monetary policy is still on the accommodative side and a variety of arguments support this assessment, ECB Executive Board member Jürgen Stark said late Tuesday. A correction of global imbalances could entail a risk of sharp capital movements, ECB Governing Council member Vítor Manuel Ribeiro Constâncio said. The ECB is not pre-committed to any particular interest rate path but instead will asses the data and take the decisions it deems necessary, ECB Governing Council member John Hurley said.

Asia-Pacific

• Australia’s consumer confidence held close to a record in July. The confidence index fell 0.6% from June to a seasonally adjusted 120.8, according to a Westpac Banking Corp. and Melbourne Institute survey. A reading above 100 indicates optimists outnumber pessimists.


• Japan’s consumer confidence index fell to 45 in June from 47.3 in May, the Cabinet Office said. Sentiment was the lowest since it declined to 44 in December 2004. A number below 50 indicates pessimists outnumber optimists.


• Japan should invest $700 billion of its currency reserves in higher-yielding assets such as stocks and corporate bonds, said Takatoshi Ito, an adviser to the prime minister.

FX Strategy Update