Global Capital Markets

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As of April 2008

U.S. Currency

by Manpreet Hochadel, CFA
JPMorgan Investment Analytics and Consulting
manpreet.s.hochadel@jpmorgan.com

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Even with the gains in April, the U.S. Dollar relative to the Euro and Yen has declined YTD by 7.1% and 7.5%, respectively.

by Manpreet Hochadel, CFA
JPMorgan Investment Analytics and Consulting
manpreet.s.hochadel@jpmorgan.com

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Historically, a steep yield curve (differential in yields between 3 months and 10 years) implies a positive assessment of the longer term economic conditions in the U.S. by the fixed income markets.

by Simreet Gill
JPMorgan Investment Analytics and Consulting
simreet.k.gill@jpmorgan.com

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After six months of almost exclusive focus on U.S. weakness and Fed easing, the market's attention has turned to the slowdown now unfolding in the Euro area and intensifying in the UK.
NOK is set to benefit from the improved risk backdrop. Oil prices continue to surge whilst the Norges Bank has maintained its hawkish views and is expected to hike rates again this year.

AUD benefits from high rates and the commodity price boom.
Waning U.S. recession risks have reinvigorated the carry trade, pushing up the highest yielders (AUD, NOK, emerging markets) and pushing down the funding currencies of JPY and CHF.