MARKET REPORT MONDAY 14^TH APRIL 2008

Good Morning,

The G7 finance ministers met on last Friday and their statement showed great concern about sharp fluctuations in major currencies and their possible implications for economic and financial stability. There were changes to the FX section of the G7 communiqué, which could mildly be positive for USD in the very near term but no significant implications in the long term. The Dollar opened this morning slightly stronger at 1.5780 against the Euro and 1.9710 against Sterling . The Euro in response moved slightly off the highs against Sterling - opening at 1.2490 levels.

The key theme for data releases this week is the upside risks to inflation and analysts expect the UK producer prices data to show intense cost pressures for manufacturing companies. The consumer price inflation (expected tomorrow) rose to 2.5% in February and a further increase to 2.6% in expected in March. This is due to rising food and energy prices.

The impact of the sharp drop in US consumer confidence this year is expected to weigh on household spending according to a report in this morning’s Financial Times. With sentiment knocked by recession fears, the University of Michigan ’s index of confidence fell to 63.2 for April from 69.5 in March and is the lowest level for 26 years.

The US March Retail Sales data, due today, is expected to be flat m/m according to economists and the figures in February showed Retail sales down -0.6%. Although core Retail Sales are expected to be unchanged, sales excluding autos are expected to increase 0.1% against a consensus of 0.2%.

Michael Ince
Senior Trader
First Rate FX

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