• The dollar was mostly higher on Wednesday after Luxembourg’s Finance Minister Jean-Claude Juncker signaled the weak dollar may harm global economic growth. The yen and Swiss franc fell on increased risk appetite as US equity prices rose. Sterling traded lower although the Bank of England minutes showed two BOE MPC members preferred no interest-rate cuts. The Canadian dollar fell as Canadian retail sales unexpectedly fell in February, increasing speculation of further Bank of Canada aggressive rate cuts following yesterday’s 50 basis-point cut to 3.0%.
  • The AUD/USD penetrated the triple-top resistance and touched the highest level since 1984 as Australia’s consumer inflation rose to 4.2% y/y in Q1 2008 for the first time in seven years. The pair is supported by high Australian growth and interest rates. High commodity prices have also supported the pair but limited the aussie’s gain as the CRB-index sold off sharply today. There are signs of topping commodity prices and slowing Australian growth. Therefore, we sell one unit of the AUD/USD with stop at 0.9635 although it may be risky.


Financial and Economic News and Comments

US & Canada

  • Canadian retail sales unexpectedly fell 0.7% m/m in February to C$35.5 billion ($34.8 billion), mainly due to lower car sales as the automotive sector dropped 1.3% m/m, Statistics Canada reported. Excluding automotive-related goods, February retail sales fell 0.3% m/m, compared to an expected 0.4% m/m gain. Despite February’s month-on-month decline, retail sales rose 5.7 % y/y.


  • The composite index of EMU services and manufacturing rose to 51.9 in April from 51.8 in March, the Royal Bank of Scotland said. The EMU preliminary service PMI unexpectedly rose to 51.8 from 51.6. The EMU manufacturing PMI fell more than forecast to 50.8 from 52.0. The figures indicate euro-zone economic activity is likely to expand at a moderate pace; however, the falling trends in these indicators show downside risk to European economic growth is increasing.


  • Euro-zone industrial orders rose a stronger-than-expected 0.6% m/m and 9.9% y/y in February, Eurostat reported. Excluding the ships, railway and aerospace sectors, industrial new orders fell 0.3% m/m in February but rose 7.2% y/y.
  • Bank of England policy makers had the first three-way split in almost two years as they lowered the benchmark interest rate 25 basis points this month. David Blanchflower argued for a bigger rate cut while Andrew Sentence and Tim Besley wanted no change in the benchmark rate. The divergence of views among the nine rate setters at their April 10 meeting came as a surprise as a unanimous or 8-1 vote to cut the bank rate a quarter point to 5.0%. The majority of the nine-member Monetary Policy Committee voted to cut the rate 25 basis points to 5.0% “to offset, partly but not wholly, the current and prospective downward shift in demand arising from the deterioration in global credit conditions,” the BOE minutes showed.
  • Luxembourg’s Finance Minister Jean-Claude Juncker expressed concern that the declining dollar will take a toll on economic growth that “financial markets should pay higher attention to developments to come and should be concentrating less on short-term information.”


  • Japan’s exports increased a slower-than-expected 2.3% y/y and imports rose 11.1% y/y in March, resulting in a 30.2% decrease in Japan’s March trade surplus to ¥1.12 trillion ($10.9 billion), the Finance Ministry said.
  • Australia’s inflation rate rose to a higher-than-expected 4.2% y/y in Q1 2008, the highest inflation rate in seven years, the Bureau of Statistics said. Consumer prices rose 1.3% q/q in Q1 following a 0.9% q/q increase in Q4 2007. The core inflation indicator rose 1.3% q/q and 4.4% y/y in Q1.


FX Strategy Update