NEWS / Foreign Exchange

UK Producer Prices Exceed Expecataions in March

- The European indices are currently trading in positive territory today led higher on increased speculation of further consolidation in different areas of the European market, including speculation that the Royal Bank of Scotland may offer to buy ABN Amro.

- European government bonds are currently trading moderately higher in today??™s session, but have remained relatively quiet today. Gilts are also trading higher, but are off of their best levels.

- The final German consumer price index for the month of March was unchanged from the preliminary reading, however, the harmonized consumer price index was revised down to 0.2% m/m, and 2.0% y/y, from a preliminary reading of 0.3% m/m, and 2.1% y/y.

- The Bank of France business sentiment index for the month of March rose to 112 from 110 in February, to its highest level since January of 2001. The Bank of France said that the growth outlook is positive for the coming months in all sectors except the auto-sector.

- ECB??™s Mersch said overnight that the US economic slowdown should have a muted effect on the Euro-Zone economy. Mersch said that he does not expect a sharp US economic downturn at this point.

- Swiss Finance Minister Merz said overnight that the interest rate gap between the ECB and the SNB should not be too big. Merz said that the tighter SNB policy was needed to avoid an economic overheating. Merz forecasted 2007 GDP growth of 2.5% to 3.0%.

- Swedish Riksbank released the minutes from the March 30 interest rate meeting where Risksbank left rates unchanged at 3.25%. Riksbank noted that one member, Oeberg, voted for a 25 basis point rate hike. Oeberg noted that upside inflation risks have increased since February.

- The Spanish current account widened to a deficit of ?‚¬10.6B during the month of January, to its widest deficit on record.

- In the UK overnight PPI input and output data exceeded expectations on all fronts. Notably, PPI output core y/y rose to its highest level since November of 2004. Output prices rose as the prices of scrap metals and petroleum products rose during the month of March. Also in the UK overnight, DCLG UK house prices rose more than expected to 12.1% to their highest level since March of 2005.

- Euro-Zone consumer prices for the month of March rose to 0.7% m/m, above estimates of 0.6%. Both y/y and core y/y figures were in line with estimates of 1.9%.

- The GBP/USD rose above the $1.99 level today for the first time since September of 1992.

- OPEC??™s President Al-Hamli said overnight that oil markets are well supplied, noting that OPEC is ready to supply more oil if necessary. Al-Hamli said that oil consuming countries should be open on demand. Al-Hamli expressed satisfaction regarding the member nation quota cut compliance. Front month crude futures are currently trading in positive territory in the session, and sit below the $64 handle.