Australian FOREX Weekly Outlook 14/01/2008

Fed Chief hints at 50 bps point cut, US CPI figures key this week

14/01/08

last week’s currency trading review

The Dollar continued to struggle against a number of majors despite finding some support in the early part of the week. It was not until Chairman Bernanke’s comments mid week that “downside risks to the economy” remain caused investors to price in a possible 50 bps rate cut. The dollar ended the week on poor Trade Balance data, with the deficit further widening on Friday ensuring views of the Fed slashing rates on the 29^th of January gained in momentum. The Euro saw the central bank hold rates on Thursday, whilst President Trichet hinted at further tightening on the back of continuing economic growth. Despite data in the early part of the week had shown that the Consumer Spending may have slowed on poor retail sales figures. The EUR closed last week at 1.4792 having opened at 1.4772. The Japanese Yen had a quiet week on the data front, tracking moves in stock prices. Friday night saw Wall Street saw risk appetite dwindle, as the Yen was able to cap its weekly decline of 0.4% against the dollar. Overall the USDJPY closed the week at 109.44 having opened at 108.41. The GBP had a tumultuous week once again, sinking to a fresh record low versus the Euro. The BoE kept rates on hold despite views the economy remains sluggish with investors prone to pre-empt a rate cut in the next meeting. GBP closed the week at 1.9600 having opened at 1.9728. The AUD reported a string of buoyant data as Retail Sales for the month of November and then saw the Trade Deficit narrow the following session. The AUDUSD opened the week at 0.8938 before closing the week at 0.8729.

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The forex trading week preview

In the States finds a heavy data week scheduled with Retails Sales and PPI heading the week. Undoubtedly CPI figures on Wednesday will be key for any further hint at rate movements at the end of the month. Thursday’s release of the Housing starts and Philly Fed will be supported by Speeches from a number of fed officials including Bernanke, in which it is assumed that the economic outlook will be of focus. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone German ZEW survey is out on Tuesday, whilst CPI data will be published on Wednesday. Not to be outdone, ECB’s Trichet and Almunia are scheduled to attend a Euro conference in Cyprus on Thursday. In the UK House prices are released on Tuesday, along with CPI figures Unemployment Wednesday and Retail Sales on Friday. e will provide our previews and reviews of these data releases in the daily summary.

In Japan markets will be closed on Monday, before the release of Balance of Payments and Machine Orders due Tuesday. We will provide our previews and reviews of these data releases in the daily summary.

In Australia Aussie Unemployment Rate figures will be released on Thursday before RBA Stevens is scheduled to speak in London on Friday. NZ CPI (Wednesday) and Retail Sales on Thursday. We will provide our previews and reviews of these data releases in the daily summary.