Expert Analysis of Today's Market

• In NY trading Friday, the greenback was mostly weaker against other key currencies on speculation rising subprime mortgage defaults will lead to higher interest rates for private borrowers and curb economic growth. Sterling rose to a new 26-year high on speculation the Bank of England will raise interest rates on strong UK GDP growth. The Canada dollar fell the most in more than two weeks on concern subprime mortgage slowdown in the US will spread and reduce demand for Canadian exports. The EUR/USD touched a new alltime high; however, having not convincingly broken the 1.3820 resistance.


• The EUR/JPY and USD/JPY fell the most in more than a week as Standard & Poor’s cut ratings on European collateralized debt obligations and gauges of investor appetite for corporate bonds and loans fell. After dropping overnight to the weakest since 1986 against the New Zealand dollar and the lowest since 1992 versus the pound, the yen rebounded in cross-trades as US equity markets sold off. The USD/JPY support from the upward sloping bull-channel has been broken and the 121-handle support is being tested today. If this support is broken, the USD/JPY will drop.

• The dollar index is testing the 80-support, an area where the dollar reversed its loss in the past. If this support was broken, there would be another down-leg for the dollar. As long as the asset markets are stabilized, the support will possibly hold.

Financial and Economic News and Comments

US & Canada

• US stocks erased this week’s gains falling from record levels Friday after earnings at Google Inc. and Caterpillar Inc. missed estimates and banks forecast higher losses from bad loans.

Europe

• UK economic growth accelerated in Q2 2007 as industrial output bounced back. GDP rose a stronger-thanexpected 0.8% q/q and 3.0% y/y in Q2, compared with 0.7% q/q and 3.0% y/y in Q1, the Office for National Statistics said.


• The UK has no plans to join the euro in the near future, Prime Minister Gordon Brown said at a press conference in Paris. The UK government’s policy is that it will join the European Economic and Monetary Union only if, and when, the economic conditions are right, Brown said.

Asia-Pacific

• China plans to raise its benchmark one-year lending rate to an 8-year high of 6.84% tomorrow, from 6.57%, the People’s Bank of China said. The one-year deposit rate will increase to 3.33% from 3.06%. This is the third time since March China is raising interest rates to cool the fastest pace of economic growth in 12 years and restrain inflation.


• China’s enterprise commodity price index, which measures the prices at the wholesale level, rose 5.4% y/y in June, from May’s 5.1% y/y, the People’s Bank of China said. Wholesale prices have been picking up for three consecutive months.

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