Market Thoughts

Trichet commented that one of our risks is possible slowing of world economy and uncertainty about the prospects for economic growth remains unusually high. He was concerned about excessive forex moves and mentioned the US authorities dollar comment adding that disorderly forex movements undesirable for economic growth. He expressed that euro zone inflation is expected to remain significantly above 2 pct for most of 2008 unlike his previous talking of a an inflation slowing down but he said it clearly that If we had cut interest rates, we would suffer higher inflation and Interest rates are there to deliver mid-term price stability. He mentioned today's better than expected release of the germane IFO which reached 104.8 this month. His talking about inflation was much awaited by the market he sees upside inflation risks prevail over mid-term and there is strong money growth currently and the inflation pressures from oil and food are downsize economic risks. On growth, he mentioned that latest data shows moderating growth and investment should provide ongoing support, The Employment has increased significantly and the unemployment is down and the consumption should contribute to economic expansion and ensured the ECB 2008 Euro zone GDP forecast of  1.8% and the EU fundamentals sound good and solid. His inflation up side risk upgrading can add to the single currency gains subjecting 1.60 versus the greenback to penetration as there is no believe of following US and cutting interest rate in the time of expected growth on recent potential at 1.8% this year. The strong single currency can tackle this inflation.

From the other side in UK, the cable had a shot from the BOE chief economist when he said that there can be a slowing down in spending later this year. Marvin King indicated in front of UK Treasury Select Committee that Monetary policy differences vs Fed, ECB reflect economic factor and he has had very useful talks with banks on turmoil. He is concerned for some time on c/a deficit. The liquidity should be provided in needs but BOE liquidity moves can only be temporary and in a dovish way he affirmed that it is unrealistic to assume that markets are to return to normal near term adding that risk of losses should remain with bank shareholders. The financial sector needs more careful monitoring and they have to hold more capital over the long term. He caused the credit crisis by global lending boom in recent years which was fuelled by cheap credit which led to complex debt products.

Now We Wait from US for we have the new home sales and building permits numbers after the 2.9% to 5.03 m increases of the existing home sales of February. The new home sales are expected to be 580m last month and also last month Durable goods orders which are expected to be positive this month at .8% after last month massive decline to 5.1%.