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201878 Resource 128466 128654 128654 1208389625338 1208389625338 Controlled Asian Morning Update 17th April 2008

Technical Dollar reversal signals grow – but a catalyst is required to confirm

European overnight releases:February                                       Forecast    Actual Italian Trade Balance (Total)  EUR    -1.42bn   -408mn Italian Trade Balance (EU)      EUR   +125mn  +905mn U.K. ILO Unemployment Rate              5.2%       5.2%March U.K. Jobless Claims Change               - 1.8K     - 1.2K U.K. Claimant Count Rate                    2.5%      2.5% Euro-zone CPI                    (MoM)     +0.9%    +1.0% Euro-zone CPI                     (YoY)     +3.5%    +3.6% European releases were not as forecast or close to so little impact except any benefit from them not being worse. However, little movement could be derived from them and neither from the now run-of-the-mill ECB comments concerning inflation and “Europe’s still ok.”Reuters report quotes from a BOE source who stated that any plan for the credit crisis is still some way off. However, the FT comments that the CB is close to finalizing the terms for an intervention which would see the Bank swapping mortgage-backed securities for government bonds for a period of one to three years. States overnight releases:       March                                           Forecast    Actual U.S. CPI                            (MoM)    +0.3%    +0.3% U.S. CPI                             (YoY)    +4.0%    +4.0% U.S. CPI ex food & energy   (MoM)    +0.2%    +0.2% U.S. CPI ex food & energy    (YoY)    +2.4%    +2.4% U.S. Building Starts                          1020K      947K U.S. Building Permits                         970K      927K U.S. Industrial Production    (MoM)   - 0.1%     +0.3%April Bloomberg Global Confidence      13.08 (prior)  14.54  U.S. inflation came in as expected, building release below and industrial production higher. ON top of that the Bloomberg global confidence index rose by 1.46 to 14.54 in April suggesting some of the extreme fear has begun to dissipate. Still, this type of confidence boost must also come out from consumers also to lower the risk of a deeper slowdown. Until households feel more confident of making larger purchases the likelihood of a sustained slowdown remains quite high.The impact of energy prices draining consumers of available spending power on other goods can have a significant impact on the real economies in Europe and the States. Certainly some members of OPEC appear to be enjoying the ability to leverage their advantage as the Iranian Oil Minister commented “Why should OPEC try to lower prices? ... Let America and Britain continue demanding.” Crude oil peaked above $115 yesterday. Fed members continue to ply the story that the U.S. may still not yet be in recession. Plosser commented that it may not be a recession “but it feels pretty bad.” Very clearly the Fed and also ECB officials talk up their respective economies but they are very aware that consumer confidence is the last barrier to a serious global downturn. They have every reason to maintain the series of positive comments.The comments from the Beige Book highlighted that the economy continues to slow while prices continue to rise driven by food, fuel and raw material prices. Manufacturers are intending to pass on rising raw material costs. Furthermore the report confirmed generally weaker labor markets but also wage pressures and continuing shortages of skilled workers. Housing markets and home construction remained sluggish throughout most of the country. However, the dreaded cocktail of weakening building starts and permits along with higher inflation appears to have been the catalyst for further Dollar selling which pushed the Euro above the 1.5912 high to reach a new historic high at 1.5978.One interesting exception was Dollar-Yen which had been the focal point of fear in the declines since last August. Following a brief dip it quickly rallied to close towards the day’s highs and suggests that risk aversion trades may have burned themselves out. Note also that the Dollar is still comfortably above its lows against the Swiss Franc while the Pound still languishes. This divergence is beginning to highlight the extended nature of the Dollar’s losses against the Euro. Technical conditions are perfect for a reversal though there still needs to be some key Dollar resistance levels to be taken out to confirm that situation.Short term bullish Euro momentum is still strong and this does provide the risk of a new extreme today of tomorrow but with a host of targets around the 1.5950-1.6050 area there is reason to be cautious about expecting an excessive move at this point. More later once the daily analysis has been done…The following releases are due from Asia due today:Australia – March                       Prior Preliminary BoP Imports (MoM)  +0.3%Japan - February Industrial Production (F) (MoM)  - 1.2% Industrial Production (F) (YoY)   +4.2% 9 application/xml false BOE Building starts CPI credit crisis currencies Euro-zone Forex FX industrial production inflation permits US New to Forex? 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