Expert Analysis of Today's Market

• The dollar was modestly higher against other major currencies in a light post-Thanksgiving holiday trading Friday. The US stock market closed its session higher for a fifth consecutive day. Improving risk appetite in the equity market and weak Japanese economic data pressured the yen. Sterling fell as UK CBI retail sales weakened further. The Australian and Canadian dollars declined modestly. Today’s big loser was the euro, falling versus most major currencies. The National Bank of New Zealand and the Reserve Bank of Australia will slash interest rates next week. Traders bet on a 92% chance for a 125 basis-point NBNZ rate cut. The RBA will cut its cash rate target at least 100 basis points.


• The EUR/USD fell as investors increased bets the European Central Bank will cut interest rates at least 50 basis points after eurozone inflation and unemployment rose more than expected. Earlier in the week, the pair failed to penetrate the 1.31 resistance. The EUR/USD has been trading sideways since late-October, confined by the 1.31-area resistance and the 1.24-area support. A breakout of this trading channel will be followed by a larger move in the same direction.

Financial and Economic News and Comments

US & Canada

• Canada’s current account surplus narrowed to C$5.64 billion ($4.54 billion) in Q3, following an upwardly revised C$8.21 billion surplus in Q2, Statistics Canada reported.


• Canada’s producer prices were unchanged m/m in October after declining 1.2% m/m in September, Statistics Canada reported. Raw materials price dropped a more-than-expected 12.5% m/m in October, following September’s downwardly 7.3 m/m decline.

Europe

• The eurozone inflation rate slowed to 2.1% y/y in November, the lowest since August 2007, from 3.2% y/y in October, Eurostat reported.


• Eurozone unemployment soared by 225,000 in October in a deepening recession. The unemployment rate rose to 7.7% in October, the highest since January 2007, from 7.6% in September, according to Eurostat.

• According to the Confederation of British Industry (CBI) distributive trade survey, 16% of respondents reported that sales improved in November, while 62% reported that sales deteriorated, showing the resulting balance of -46% following October’s -27%.


• Switzerland’s leading KOF indicator declined more than expected to -0.05 in November, the lowest level and the first time the KOF index turned negative since June 2003, following October’s downwardly revised 0.28, according to the Konjunkturforschungsstelle Swiss Institute for Business Cycle Research. The data indicates a deteriorating Swiss economy.

Asia-Pacific

• Japan’s consumer prices excluding fresh food increased 1.9% y/y in October, matching expectations and slowing for a second month as oil and commodity prices tumbled, following September’s 2.3% y/y rate, Statistics Bureau data showed. Core prices in Tokyo, a harbinger of nationwide inflation, increased a lessthan- expected 1.1% y/y in November after rising 1.5% y/y in October.

• Japan’s jobless rate unexpectedly fell to 3.7% in October from 4.0% in September, the Statistics Bureau said. The job-to-applicant ratio declined to 0.80 from September’s 0.84. Household spending dropped a more-thanexpected 3.8% y/y in October, the eighth consecutive decline, following September’s 2.3% y/y fall.


• Japan’s industrial production fell 3.1% m/m in October after increasing 1.1% m/m in September, preliminary data from the Ministry of Economy, Trade and Industry (METI) showed. The IP dropped 7.1% y/y.


• Housing starts in Japan slowed to a less-than-expected 19.8% y/y increase, or 1.027 million in October, following September’s 54.2% y/y rise in September, the Ministry of Land, Infrastructure and Transport said. Nevertheless, construction orders rose 47.2% y/y in October, up from September’s 10.3% y/y rise.


• Small business confidence in Japan extended its declines to 35.1 in November from October’s 37.6, according to a survey by Shoko Chukin Bank.


• Japanese retail sales declined 0.6% y/y in October, following September’s 0.3% y/y decline, the METI said. Large retailers’ sales fell 4.3% y/y, following September’s 3.3% y/y contraction.


• Australia’s private sector credit increased 0.6% m/m in October, following September’s 0.8% m/m rise, the Reserve Bank of Australia reported. The private sector credit rose 9.7% y/y.

FX Strategy Update