Australian FOREX Weekly Outlook 03/03/2008

A week filled with rate announcements.

03/03/08

last week’s currency trading review

The Dollar suffered from pessimistic comments made by Chairman Bernanke and Vice-Chairman Kohn throughout the week, indicating that recession fears would persuade the Federal Reserve to cut rates further. As a result, the dollar traded at record lows against a number of currencies and commodities. Data out of the U.S. also did little to provide any added confidence to the greenback with consumer confidence at 16 year lows to end the week, whilst GDP grew at its slowest pace since 2002. The Euro traded at a record high shooting through the psychological 1.50 barrier to trade as high of 1.5238. The Euro was also supported by data in the form of German IFO which indicated that business sentiment remained positive in the region. The Euro closed last week at 1.5184 having opened at 1.4804. The Japanese Yen ended the week at fresh three year highs versus the USD as risk aversion in the later part of the week prompted a wide cross Yen sell off. The Japanese Yen began the week at 107.37 before ending at 103.88. The GBP continued to under perform due to the fallout from the ongoing credit crisis and on expectations of further rate cuts from BoE, although was able to take advantage of a broadly weaker US dollar. The Sterling Pound closed lat week at 1.9886 having opened at 1.9588. The AUD also posted fresh 24 year highs of 0.9499 on surging commodity prices and ongoing expectations the RBA will look to increase interest rates on the 4^th of March. The Aussie dollar however gave up much of its gains as plunging equity markets prompted a wide spread carry trade sell off. The Aussie Dollar closed last week at 0.9323 having opened at 0.9210. The New Zealand dollar also posted 23 year high during the week of 0.8213.

The forex trading week preview

In the States data this week is expected to continue to signal a U.S. recession, Manufacturing ISM on Monday, and Services ISM on Wednesday. Pending Home sales and initial jobless claims on Thursday, whilst the much anticipated Non Farm Payrolls heads a heavy data for the first Friday of the month, followed by Unemployment Rate. With his comments having such a drastic impact on the markets last week, Fed Vice Chairman Kohn is once again speaking on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone PMI Manufacturing and CPI figures on Monday will start the proceedings for a busy week out of the EZ. Whilst GDP, Retail Sales and PMI Services continue the theme into Wednesday. However that would be overshadowed by the ECB interest rate announcement on Thursday, and as always Trichet post press conference. In the UK The BoE meets on Thursday and no change is expected. On the data calendar this week the main focus should be the manufacturing and services PMI’s released on Monday and Wednesday respectively. We will provide our previews and reviews of these data releases in the daily summary.

In Japan should continue to track equity markets and hope to benefit from risk aversion. The BoJ meets on Friday followed by the BoJ monthly report. We will provide our previews and reviews of these data releases in the daily summary.

In Australia the RBA meets on Tuesday where it is widely expected to hike by 25 bps in order to curb inflation. Whilst Retail Sales, Current Account (both Tuesday) and GDP (Wednesday) prove to be the key pieces of economic data. Further more several RBA officials are scheduled to speak throughout the week adding to the interest. Neighboring New Zealand is also scheduled for a rate announcement this week on Thursday morning although largely expected to hold. We will provide our previews and reviews of these data releases in the daily summary.