Alaron Currency Comment

CHICAGO - May 7/08 - SNS -- Following is the currency futures comment from Alaron Trading Corp.

The DX opened higher after 'hawkish' comments from  Federal Reserve Bank of Kansas City President Thomas Hoenig yesterday, stating that higher inflation risks may require 'significant' monetary policy tightening to reduce it. Prices continued higher after a combination of weaker economic data from the EU and UK and a better than expected increase in the Non-FarmProductivity Report to +2.2% from Q4 +1.9%. The DX rose to a morning Hi of 73.84, before drifting lower into the afternoon session.

The BP opened lower at 1.9502 against the stronger DX and   retraced to a morning Lo of 1.9446 after a drop in U.K. consumer confidence and   Mfg.Production, indicating a 'need' to lower rates to stimulate the slowing economy,  ahead of the BoE, MPC meeting Thursday. Traders took profit/ risk off the table as the odds or a rate  cut increased. Analysts  are expecting rates to remain 'unchanged' Thursday, but look to shorten the time frame for  a rate cut in the near future. Prices bounced into the afternoon session  

The CD opened higher at .9979  on higher commodity prices and favorable U.S. economic data. Prices slid to a morning Lo of .9914, before bouncing to a mid-day Hi of .9988 and drifting lower  into  the afternoon session.  

The EC opened lower at 1.5405 on weaker than expected March Retail Sales -0.4% m/m and -1.6% y/y, the largest decline y/y   over the last 13 years. Lower consumer spending and a 5.0% drop in German Mfg.orders should weigh on the ECB rate meeting Thursday. Although rates are expected to stay 'unchanged' at the 4.0% level, analysts are expecting lower prices ahead of the next meeting. The EC fell to a mid-day Lo of 1.5337 as we begin the afternoon session.

The JY opened lower at .9528 and followed most other major foreign currency markets lower against the 'surging' DX, falling to a morning Lo of .9491. Prices recovered to .9525 as we begin the afternoon session.

Bob Kozak

Alaron Research Team

800.462.4691

bkozak.com

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