MORNING REPORT WEDNESDAY 2 ND APRIL 2008

Good Morning,

The Dollar and Wall Street stocks began the 2nd Quarter with a big rally yesterday, with financials among the biggest gainers. This was on the back of reports that Lehman Brothers and UBS were issuing new shares to bolster their balance sheets and the markets took an optimistic view that the worst of the credit crisis has passed on the back of this news.

This Dollar advance also helped the Pound rise against the Euro, trading up to 1.2700 levels. Earlier in the day German retail sales disappointed and this also helped GBP / EUR recover from all-time lows.  

The USD rose against most major currencies yesterday following better than expected US manufacturing data and news of further write downs at Swiss bank UBS, highlighting that credit problems are not just restricted to the US. The USD which is down 7 percent against the EUR in 2008, rose 1.2 percent yesterday to 1.56 levels and the USD also improved against Sterling to 1.9755 level

The JPY fell broadly after the Bank of Japan's Tankan survey showed business confidence fell to a four-year low, giving policy makers another reason to cut interest rates. The yen’s decline accelerated as stock markets surged; the JPY fell 2.3 percent against the USD.

Looking at today’s economic calendar, this morning we have UK mortgage approvals data out at 09:30 BST and EU producer prices at 10:00 BST. Later in the day the attention will turn to the US where, at 13:15 BST, we have the ADP employment report. The market will also be keeping an eye out for any surprises when Fed Chairman Ben Bernanke speaks to the Joint Economic Committee of Congress about the economic outlook, at 14:30

Michael Ince
Senior Trader
First Rate FX

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