NEWS / Foreign Exchange

German IFO Unexpectedly Grows in March

- The European indices are currently trading in positive territory in the session led by the commodity sector as oil, and metals prices gain.

- European government bonds opened lower in today??™s session following strong technical selling after the 10-year broke through the 4.00% psychological level during yesterday??™s session. EGBs moved lower upon comments made by the ECB??™s Liebscher, and even lower after the release of stronger than expected IFO data was released in Germany. In line with the EGBs gilts opened lower in the session ahead of the DMO??™s 2027 I/L gilt auction.

- Italian business confidence for the month of March fell more than expected to 94.9 as manufacturers anticipate that a weakening economy in the US will cause a drop in demand for exports.

- In Germany the IFO business climate, current assessment, and expectations all rose unexpectedly, beating estimates, and moving back towards multi-year highs seen in December. According to the IFO??™s Nerb domestic demand is the driving force behind the economic upswing in Germany. Nerb forecasted German GDP of at least 2.0% in 2007.

- BBA mortgage approvals rose to 54,659 in February, from the, upwardly revised, previous reading of 42,804. Mortgage lending rose to ??8.22B in February from a prior reading of ??6.28B.

- CPI in the German state of Saxony fell to 0.3% m/m in March from 0.4% in February, however CPI rose to 2.5% y/y in March from 2.3% in January.

- The ECB??™s Liebscher said overnight that, ???inflation clouds are [seen] developing on the horizon??? during the second half of 2007, and in 2008. Liebscher reiterated that the ECB is not pre-committed on future rate decisions, and pointed out oil prices, protectionism, and global imbalances as medium-term inflation risks. Liebscher also reiterated that wage developments could cause second-round inflation effects. Shortly after Liebscher??™s comments, an interview held with the ECB??™s Garganas yesterday was released, in which Garganas made comments that were much in line with those made by Liebscher today.

- In a testimony to the treasury committee the Bank of England??™s King said that the economy has expanded at a steady pace. King said that it is too early to say if volatility is over, noting that the MPC must look through CPI fluctuations. King also said that the big picture is how long term interest rates remain low.