MARKET REPORT MONDAY 7TH APRIL 2008

Good Morning,

The US dollar fell against major currencies on Friday following worse than expected non-farm payrolls data which showed a fall of 80,000 jobs in March. The report also showed that the US unemployment rate rose to 5.1% from 4.8% last month, the highest level since September 2005. However, the Dollar has been supported by improved sentiment on the US economy in recent trading sessions so losses proved short-lived and do has gained against sterling this morning – trading at 1.9875 levels.

With a relatively light schedule of data releases this week, the focus will be on the various policy meetings with the ECB and BoE both announcing their rates decisions on Thursday.

The ECB is likely to keep rates unchanged and continue to stress that its main concerns are upside risks to inflation. Economists don’t expect the ECB to begin easing policy until its September meeting following the very high inflation reading in March. UK economists expect the MPC to cut rates by 25bps to 5.0 % this week on the back of increasing evidence of tighter credit conditions in the UK . Inflation risks remain so the risk to this forecast is that the MPC delay a rate cut until May.

Relative rate expectations for the ECB and BoE as well as further downside risks to the UK economy have been the main factors in driving GBP-EUR lower to 1.2650 levels.

The Minutes of the Fed’s March 18 meeting are released tomorrow, and could be supportive of the dollar given that the Fed has signalled uncertainty over the inflation outlook.

G7 Finance Ministers and Central Bankers meet on Friday.  Economists anticipate that this meeting will have little impact on the Foreign Exchange Market as the depreciation of the USD has arguably been consistent with a weak US economic backdrop making any co-ordinated intervention unlikely.

Michael Ince

Michael Ince
Senior Trader
First Rate FX

Archive News

This commentary is generic and may not suit all circumstances. Before taking any action, we recommend either contacting your trader for guidance or obtaining independent financial advice. The information in this document was obtained from sources believed to be reliable but its accuracy and completeness cannot be guaranteed. The views and recommendations in this communication are typically short term trading views. Comments constitute views at the time of writing and are subject to change without notice. The rates shown are all indications. For specific quotations, please contact your usual trader. This document is not intended as an offer, solicitation or recommendation to buy or sell.