• The dollar was stronger against its key rivals following Thursday’s data showing the US Q4 GDP growth in line with market expectations and a decline in US jobless claims. Sterling gained against the euro, as stocks rallied in Europe, stoking appetite for higher-yielding assets. The Australian dollar traded near a one-week high. The New Zealand dollar declined as demand for its higher-yielding assets waned. Investors await Friday’s key US economic data: US personal income, personal spending, and the Reuters/University of Michigan sentiment.
  • The USD/JPY rose slightly today. The pair may have established a new trading range between 96 and 102. The pair is in a clearly defined downtrend but overbought. There is strong resistance in the 102-area. The pair is trading in tandem with the equity market. As long as the downtrend in the stock market is not broken, the resistance at 102 is likely to hold.


Financial and Economic News and Comments

US & Canada

  • US initial jobless claims fell 9,000 to 366,000, still at elevated levels, in the week ended March 22, the Labor Department said. The four-week average of new jobless claims rose 1,750 to 358,000, the highest level since October 2005. Continuing claims fell 5,000 to 2,845,000 in the week ended March 15. The four-week average of those continuing claims increased, indicating it is more difficult for the unemployed to find jobs.


  • The US final Q4 2007 GDP estimate stayed at a sluggish 0.6% annual rate, the slowest pace since late 2002, compared with a 4.9% annual rate in Q3 2007, the Commerce Department said. The final Q4 GDP estimate contained fresh data on corporate profits: After-tax profits from current production fell $37.9 billion or 3.3% quarterly, to an annualized $1.11 trillion. Net cash flow fell $55.7 billion or 4.4%.
  • Federal Reserve Bank of Atlanta President Dennis Lockhart said the US economy appears on the verge of recession with little growth this quarter and a recovery in the second half of the year may be slower than expected. Lockhart said in a speech to the Rotary Club of Chattanooga, Tennessee: it's clear the economy is in a slowdown that resembles past periods that were the leading edge of a recession. Economic growth has been slowing since the third quarter of last year coming off solid growth rates in the second and third quarters of 2007. Following a sluggish fourth quarter, I expect that GDP for the first quarter of this year will show little, if any, growth.


  • German consumer sentiment rises slightly to 4.6 points for April, up from 4.5 points for the first time since January, the GfK Group reported The group credited positive trends in the German labor market, along with wage increases won by unions in collective agreements for lifting expectations among consumers; however, the group warned uncertainty persists among German citizens with regard to economic developments. The economic expectations indicator rose marginally by 0.4 points and now stands at 15.0 points. The income expectations indicator stands at 1.5 points and has returned to the positive range for the first time since September 2007. The propensity to buy indicator has risen and currently stands at -10.2, still considerably below the long-term average of 0 points.


  • UK retail activity remained subdued in March with high street stores reporting flat year-on-year sales. The resulting balance of +1 in March was marginally better than retailers’ expectations (-2), which followed February’s figure of -3, the first negative balance since November 2006, the CBI Distributive Trades Survey showed.


  • The Australian financial community though affected by the global financial-market turmoil is weathering the storm well, Reserve Bank of Australia Governor Glenn Stevens said. There is very little direct exposure to the US sub-prime problems, but the main reason for the resilience is many years of robust economic growth, sound regulatory foundations and prudent risk management. The Reserve Bank has been carefully monitoring access to funding, including offshore funding. We judge it to have been more than adequate, even if more expensive, though, of course, we will continue to watch the situation closely, Stevens said in a speech to a Euromoney conference in Sydney.

FX Strategy Update