NEWS / Foreign Exchange

Euro-Zone M3 Pushes New 17-Year High

- The European indices are currently trading lower in the session as oil prices climb and speculation that a decline in economic growth in the US will effect companies??™ earnings.

- European government bonds are currently trading lower in the session after a flat open. EGBs gained some downside momentum upon the release of stronger than expected M3 data in the Euro-Area. German sold ?‚¬5.0B in 4.00% S150 Bobls with an average yield of 3.92% and a bid to cover of 2.4. The bid-to-cover was above the neutral call of 1.94, as well as the cover of 2.2 on the previous auction. Gilts are also under performing today despite a downward revision to the final reading on forth-quarter GDP in the UK.

- Nationwide House Prices inflation slowed in the UK to 0.4% m/m in March, below estimates of 0.7%, and to 9.3% y/y, below estimates of 9.6%. Nationwide's Chief Economist pointed out that thus far house prices have grown by 0.4% per month in 2007 as compared to growth of 1.1% per month during the last quarter of 2006. The chief economist said that the underlying trend in house price growth is clearly softening. Furthermore Nationwide pointed out that the three-month growth rate fell to its lowest level since August of 2006 at 2.1%. Nationwide maintained its 2007 house price growth forecast of 5-8%.

- German GfK consumer confidence rose to 4.4 in April from the downwardly revised 4.3 in March. According to the GfK ???a continuation of the very optimistic prospects for the economy are having a positive impact on both buying propensity and income expectations.??? According to the GfK consumers are also more optimistic based on beliefs that pay rises will be more generous than they previously were in other sectors. Recall that Germany??™s IG Metall union rejected an offer for a wage hike of 2.5% yesterday.

- Final fourth-quarter GDP was revised down to 0.7% q/q from the preliminary reading of 0.8% as a result of lower growth in the service sector perhaps reducing the call for further interest rate hikes in the coming months.

- In the Euro-Zone M-3 data rose to a new 17-year high on both a y/y and 3-month average basis increasing speculation that the ECB will have to raise rates within the coming months.

- The ECB??™s Gonzalez-Paramo said overnight that interest rates in the Euro-Zone are still below those in other area, noting that growth remains robust. Paramo said that, in the medium-term, inflation risks persist, and said of the 208 inflation outlook that it is slightly worse.

- The OPEC secretary general said overnight that there is plenty of oil flowing into the market, noting further that the recent price surge is unrelated to the fundamental picture.