Australian FOREX Weekly Outlook 28/11/2006

28/11/06

last week’s currency trading review

The Dollar was mixed during the early part of the week before sliding against the majors as the absence of any major data ahead of US Thanksgiving meant the market was thinly traded. A poorer than expected jobless claims and consumer sentiment did not help the greenback when during the Friday European session, Euro finally broke through 1.30 triggering a stop-loss run past 1.31. The Euro was further boosted by a better than expected German IFO business climate. The Euro closed last week at 1.3086 having started the week at 1.2813. The Japanese yen also benefited from the weak dollar despite a worse than expected trade balance and subsequent Labour Thanksgiving Day holiday. USD/JPY closed last week at 115.84 having started the week at 118.09. The sterling closed last week at 1.9315 having started the week at 1.8965. UK GDP came in as expected and the BoE MPC minutes showed a 7-2 vote for an increase in rates which was interpreted as slightly dovish. The Aussie followed other majors amid a relatively light data week. The Aussie closed last week at 0.7782 having started the week at 0.77.

The forex trading week preview

In the States the US housing data comes in the form of sales for new homes (Wednesday). Analysts expect a decline in the measure of national house prices (OFHEO) for Q3 due out on Friday. The impact that a weaker housing market has had on the consumer remains mixed. Certainly the pace of growth of consumers’ expenditure has slowed recently and that is expected to be confirmed in the personal spending data (Thursday). The outlook for the US manufacturing sector has taken a hit recently with surveys becoming distinctly less upbeat. The Chicago PMI looks unlikely to rebound (Thursday). The national ISM has dropped decisively recently and it may consolidate in October (Friday). The closely watched core PCE index (Thursday) is likely to show another modest monthly gain. Finally in the US, the revisions to the initial estimate of Q3 GDP growth (Wednesday) are expected to be small. We will provide our previews of these data releases in the daily summary.

In the Eurozone The German PMI should be helped by rising overseas demand (Friday). The more comprehensive European Commission survey of both industrial and consumer confidence is expected to move towards a better outlook (Thursday). ECB watchers will also be waiting for the flash estimate of Eurozone inflation in November (Thursday). In the UK the interest in the UK is bound yet again to revolve around the housing market and the implications of the comprehensive BoE data for mortgage approvals and lending (Wednesday). The improvement in the position of the manufacturing sector, highlighted by the most recent CBI survey, is forecast to be reflected in a better manufacturing PMI (Friday). We will provide our previews and reviews of these data releases in the daily summary.

In Japan manufacturing PMI is due out Thursday. Inflation data out on Friday are expected to confirm positive inflation.