Australian FOREX Daily Outlook 14/06/2007

USD rallies on the back of strong Retail Sales. RBA Governor Stevens expected to take a hawkish tone, EZ CPI out along with UK Retail Sales.

CURRENCY TRADING SUMMARY –14 JUNE 2007 (00:30GMT)

• U.S. Dollar Trading (USD) continued to be buoyed by higher treasury yields, and was further supported by data showing U.S. Retail Sales growth in May was at is highest level since January 2006. Retail Sales for the month was forecasted to come in at 0.7% yet surprised coming in at 1.3%. Although the USD rally was short lived as Treasury yields eased from their five year highs. In U.S. share markets, the NASDAQ was up by 32.54 points (+1.28%) whilst the Dow Jones was also up by 187.34 (+1.41%). Crude oil rose by US$0.91 a barrel to US$66.26. Looking ahead, Core PPI is scheduled for release on Thursday with markets awaiting a figure of 0.2% (previous: 0.0%) for the month of May.

• The Euro (EUR) eased initially on the back of a broadly stronger dollar, but soon found support with a drop in US Treasury yields. Overall, the EURUSD traded with a range of a low 1.3264 and a high of 1.3316 before closing the day at 1.3311. Looking ahead, key data out of the EZ will be in the form of Core CPI with expectations 0.2% for the month of May (Prior: 0.5%)

• The Japanese Yen (JPY) eased to a 4.5 year high against the USD today, supported by data showing U.S. retail sales growth in May was the highest since January 2006 and further fueling carry trades. Overall, the USDJPY traded with a range of a low 121.50 before closing near day highs at 122.73.

• The Sterling (GBP) rallied against the Dollar following the decline in US treasury yields. In data news, Unemployment came in flat at 5.5% and was shrugged off by markets. Overall, the GBPUSD traded with a range of a low 1.9679 and a high of 1.9769 before closing the day at 1.9734 in the New York session. Looking ahead, UK Retail Sales will be key data release for the month of May, with forecasts at 0.3% (Prior: -0.1%)

• The Australian Dollar (AUD) held firm against the USD on Wednesday, with investors pushing the currency back above 0.84 levels on expectations that a rate hike by the RBA will materialize in the near future. Overall the AUDUSD traded with a low 0.8360 and a high of 0.8427 before closing the day at 0.8400 in the New York session. Looking ahead, plenty of focus will shift to RBA Governor Stevens speech on Thursday, where markets will listen to attentively for any indication of future monetary policies. A hawkish tone is expected on following recent strong data releases, supporting economic growth.

• The Mexican Peso (MXN) weakened down 0.22% at 10.957 per dollar, pairing sharper losses overnight when the currency fell as far as to 11.06 pesos to the dollar.
  Also, a report showed sales by U.S. retailers rebounded by a stronger-than-expected 1.4 percent in May good news for the Mexican economy which sends nearly 90 percent of its exports to the United States.

• Gold (XAU) eased by US$0.40 an ounce to US$652.70 as investors remained cautious on inflationary pressures.