Australian FOREX Daily Outlook 05/02/2007

CURRENCY TRADING SUMMARY –05 FEBRUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) traded in a heavy data-day with Non-Farm payrolls coming in weaker-than-expected. Markets initially forecasted 145K, whilst the actual was a figure of 111k. However this weak economic data did not have the expected influence on markets as previous months (November and December) were revised higher. In other weak economic data released from the US, Unemployment rose slightly from the previous 4.5% to 4.6% (0.1%). As a result the USD was mixed against other majors on Friday, as Non-Farm payrolls indicated that the Fed Reserve would likely keep interest rates unchanged in coming months, as speculation surrounded the ECB increasing rates on one more occasion within the coming year. In other markets, the NASDAQ rose by 7.50 points (0.3%) and the Dow Jones dropped -20.19 points (-0.16%). Crude oil was up US$1.88 to US$59.18 a barrel as investors covered positions on prospects that colder weather will set in the US over the coming week. Looking ahead, Non-manufacturing ISM looks to be the key data for scheduled for release out of the US today. With market expectations being an index of 57.0 slightly higher than the previous 56.7.

• The Euro (EUR) fell against the USD closing the day below the psychologically important level of 1.3000. Following weak payrolls data out of the US, the Euro hit a high of 1.3065 before shortening to 1.2951 and closed at 1.2966 by the end of the New York session. The Euro weakened against USD following “well informed sources” saying that the ECB would raise interest rates in March/April but the immediate future would see them on hold for some time. Against the GBP the Euro dropped by 0.4% to 65.90 pence. Looking ahead PMI services is scheduled for release today with market expectations at 56.9 lower than the previous 57.2.

• The Japanese Yen (JPY) continues to have the upcoming G7 summit surrounding its position. With Eurozone officials concerned that the weakness in the Yen is a handicap European exports. Overall the Yen traded within a range of a low of 120.67 to a high of 121.35 and closed at 121.06.

• The Sterling (GBP) rose against Euro on Friday following report that the ECB will keep interest rates on hold in the immediate future. The GBPUSD traded within a range of a low 1.9639 and a high of 1.9746 before closing the day at 1.9674 during the New York session.

• The Australian Dollar (AUD) saw the release of the Trade Balance on Friday coming in worse than expected with the actual figure out at -1.336 billion rather than the forecasted-0.843 billion. Overall, the Aussie dollar traded within a low of .7718 and a high of 0.7757 before closing 0.7745 in the New York session. Looking ahead, Retail Sales is out for the month of December with market expectations at 0.5% higher than the previous 0.2%. UPDATE: Aussie Retail Sales actual at 0.3%

• Gold (XAU) fell as investors were prompted to take profits as the USD rallied against the EUR and GBP. Gold fell by US$11.50 to US$651.50 an ounce.